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| In this 2021 July file photo, a customer selects a frozen pizza item at a large hypermarket at Seoul Station, Seoul. Newsis |
By Kim Jae-heun
Local pizza restaurant franchises are aiming for a breakthrough in their declining businesses, which have been impacted by the increasing popularity of frozen pizza.
As the trend of seeking a healthy lifestyle spreads across the country and the number of one-person households increases here, the demand for large pizzas made by popular franchise firms has been decreasing.
The size of the domestic franchise pizza market stood at 2 trillion won ($1.4 billion) in 2017, but it has declined since then to 1.5 trillion won in 2020. This year, the market size is expected to go down to 1.2 trillion won.
The growing size of the frozen pizza market led by local food giants is being seen as the main reason for the continuous decline of the franchise pizza market.
Since many people have air fryers at home now, more consumers choose to buy frozen pizza and fry it in the machine, which tastes much better than defrosting it in the microwave. Also, the soaring number of single-person households has led to a rising preference for frozen pizza as it comes in smaller sizes and is cheaper than pizzas sold by franchises.
The size of the frozen pizza market has continued to grow from 88 billion won in 2017, followed by 98.1 billion won in 2018, and 124.8 billion won in 2021, lowering the percentage of franchise pizzas purchased by consumers.
To deal with these difficulties, large pizza franchises are diversifying their business models while raising prices and cutting costs in personnel expenses at the same time.
Domino's Pizza raised the prices of its pizza two times ― in January and August ― this year and so did Pizza Hut and Papa Johns in March.
Domino's Pizza also started its online business with local food delivery players to cut delivery service costs. Pizza Hut began creating menu items for individual orders and strengthened its take-out marketing promotions. It also formed a partnership with the country's second largest food delivery firm, Yogiyo, to sell exclusively menu items for individual customer orders until the end of this year.
"As the top two pizza franchise firms have changed their business models to cope with the current situation, we expect more diverse promotions to come out in the near future. They are working to overcome the difficulties by introducing new services instead of continually raising prices," an official at a local food firm said.
