As domestic coffee franchises look overseas for new growth engines, their market strategies are changing by destination. Some headquarters open company-operated stores to verify their business models directly, while others sign master franchise (MF) deals with local operators to pursue rapid expansion. Market size, consumer characteristics, and whether they can secure a local entity and partner are emerging as key variables that determine each country's entry approach.
According to the food industry on the 14th, PAIK'S COFFEE of The Born Korea(475560) recently signed a 10-year MF contract with a local partner in Taiwan. It aims to open its first store in the first half of next year, expand to around 10 in the first year, and to more than 150 in five years. Under MF, the headquarters grants the business rights for a specific country or region to a local company, which then operates stores directly or recruits franchisees to expand the network.
In Japan, where it entered just a month ago, PAIK'S COFFEE chose the company-operated model. PAIK'S COFFEE is directly running its first and second Japan stores, which opened last month in Shinbashi and Kanda, Tokyo. It is developing a Japan-only app and menu, and conducting menu tests and employee training at the local "PAIK'S COFFEE LAB." After checking consumer responses and operating results at the existing stores, it plans additional openings in Tokyo and a push into Osaka.
The choice of different approaches in Japan and Taiwan for the same brand was influenced by whether there is a local entity. A The Born Korea official said, "In Japan, we have a local corporation, so we can be directly involved in operations and respond to market reactions in real time, but there are constraints in countries without a corporation," adding, "In such cases, we look for trustworthy corporations that know the market well and proceed in an MF format."
A TWOSOME PLACE, which chose the United States as its first overseas destination, adopted the company-operated model. It will open its first U.S. store next month in Alexandria, Virginia, and its local entity plans to operate roughly 15 initial locations. Through company-operated stores, Twosome plans to assess U.S. consumer response and business profitability, and once the business stabilizes, it will consider expanding franchises.
Twosome already operates more than 1,750 stores in Korea, so it needs to prove new growth potential overseas. Its largest shareholder is global private equity fund (PEF) Carlyle, and business performance could affect future corporate value. Twosome said, "The U.S. entry is not aimed at Carlyle's investment exit," but noted, "If the U.S. business succeeds, it could help raise corporate value over the mid to long term."
Typically, the company-operated model places investment and operating risks directly on the headquarters, but store sales are booked directly as company results, boosting top-line growth. It is also advantageous for securing consumer feedback and operating data firsthand and for managing brand quality in areas such as menus and service.
MF, on the other hand, leverages the capital and business experience of local operators to reduce investment burdens and rapidly expand the store network. However, there is also the risk that local business performance and brand management depend heavily on the partner's capabilities.
In Southeast Asia, where domestic coffee franchises have recently been active, the MF model is widely used. The Venti opened its first store in the Philippines under an MF contract with local F&B company JJR Brothers Food. COMPOSE COFFEE is also expanding its local business through an MF contract with an affiliate of the Jollibee Group. EDIYA COFFEE chose MF via local operators in Malaysia and in Laos, Cambodia, and Myanmar, while MEGA MGC COFFEE adopted MF in Cambodia and Mongolia.
Industry officials say that in some Southeast Asian markets, large local operators with prime commercial districts, shopping malls, logistics and distribution networks, and franchise experience have significant influence, making MF highly efficient. They explain that rather than having a foreign brand establish a local entity and build store development, ingredient sourcing, and staffing systems from scratch, partnering with an operator that already has a business base is advantageous for reducing initial costs and trial and error. The ability to respond quickly to country-specific regulations and consumer cultures is another reason MF is used.
A franchise company official said, "It is hard to say that either the company-operated model or MF is unconditionally more favorable for overseas expansion," adding, "You need to determine your entry approach comprehensively by weighing local market size, brand awareness, and your capacity for direct investment, as well as whether there is a partner you can entrust with the business."