South Korea’s restaurant industry is in the midst of its worst downturn in nearly two decades, with over 107,000 eateries shutting down in 2024 -- the highest number on record.
For the first time in 16 years, more restaurants closed than opened, signaling a shift in a sector once known for its resilience and fierce competition. A combination of rising ingredient costs, slowing consumer spending, and post-pandemic economic struggles has created a perfect storm in the industry.
According to government data, 10.4 percent of full-service restaurants closed in 2024, the highest closure rate since 2005. In the capital city of Seoul, the rate was even higher at 13 percent, while Sejong City saw a staggering 14.6 percent closure rate. These figures reflect a growing financial strain on restaurant owners, who have faced mounting challenges since the COVID-19 pandemic reshaped the dining industry.
Rising costs and shrinking profits
One of the biggest pressures on restaurant owners has been the relentless rise in ingredient costs. Food prices have soared, squeezing already thin profit margins. Government data shows that while South Korea’s overall inflation rate was 2.3 percent in 2024, agricultural product prices jumped 10.4 percent -- on top of significant increases in previous years. Restaurant owners have tried to offset these costs by raising menu prices, but even then, usually not by as much.
Over the past three years, dining prices increased by 7.7 percent in 2022, 6.0 percent in 2023, and 3.1 percent in 2024. However, consumers began cutting back on dining out due to financial pressures, meaning overall takings fell even as the amount charged per item rose.
South Korea’s high interest rates and rising living costs have reduced household spending power, forcing many families to dine out less frequently or opt for cheaper alternatives.
A market that no longer replaces its losses
For years, South Korea’s restaurant industry operated on a cycle of constant renewal -- one business would close, but another would quickly take its place. From 2019 to 2023, more than 100,000 new restaurants opened annually, offsetting closures. But in 2024, this trend reversed. 5,374 more restaurants closed than opened, marking the first net decline since 2008.
The restaurant industry’s struggles are reflected in broader economic indicators. Statistics Korea’s Nowcast index, which tracks real-time industry performance, showed a 1.54 percent drop in delivery-based restaurant sales in 2024 compared to the previous year.
Meanwhile, inflation-adjusted restaurant industry output rose 13.9 percent in 2022 when government stimulus programs supported small businesses but fell 0.6 percent in 2023 and 1.9 percent in 2024. The decline accelerated in December, with restaurant sales plummeting 3.3 percent year-over-year, signaling a deepening slump in consumer demand.
Looking ahead, economic forecasts suggest that South Korea’s restaurant industry may face even tougher times in 2025. The Bank of Korea recently lowered its economic growth forecast to 1.6–1.7 percent, citing a sharp contraction in domestic consumption. This is a further slowdown from 2.0 percent growth in 2024, raising concerns that restaurant owners may see even fewer customers and higher operating costs in the coming year.
mjh@heraldcorp.com
