Korean shared kitchen names shutter business amid weak demand

Shared kitchen [Source : WECOOK]

South Korea’s once booming shared kitchen names are pulling out of the business due to market saturation and declining demand for delivery food after pandemic restrictions were lifted.

Garage Kitchen founded in May 2019 grew rapidly with a plan to open 550 individual kitchens, but it eventually went bankrupt last month after failing to return deposits to tenants. The company was approved for court receivership on Dec. 16, according to sources on Monday.

Other shared kitchen firms are reexamining their business model or going through the process of business withdrawal. WECOOK decided to shutter its delivery-focused shared kitchen business WECOOK Delivery. Another name Kitchen Builder is considering a market exit.

“We are thinking about closing this business to focus on other businesses,“ said an official from Kitchen Builder.

Ghost Kitchen, which suffered from sluggish business, was acquired by Kitchen Valley in July of last year.

Delivery type shared kitchen is a business that rents or purchases a large store and divides it into small kitchens of about 9.9 to 26.4 square meters (about 3 to 8 pyeong), and then sets up a restaurant specializing in delivery in each space.

Shared kitchens are commercial food preparation facilities designed to provide delivery food retailers with an opportunity to grow their businesses by allowing them to use kitchen space and professional equipment.

Shared kitchens make money from rent and some commissions from delivery sales. They emerged as a promising business model, driven by explosive increases in delivery food demand during the pandemic, but the situation has completely changed in last three years. Some point to the loss of consumer confidence due to poor hygiene as one of the reasons for the industry’s decline.