Rising delivery fees push restaurants to implement dual pricing

A view of a Lotteria store in downtown Seoul. (News1)

South Korea’s restaurant industry is increasingly adopting dual pricing, charging customers more for delivery orders compared to in-store or take-out options.

The trend has been spreading rapidly as restaurants grapple with increasing fees from delivery platforms. Companies such as Lotteria are the latest to join the movement, and the fast-food chain will charge an additional 700 to 1,300 won ($0.97) for items ordered through delivery apps from Monday onwards. Lotteria explained that handling fees, including delivery service charges and commissions, now consume about 30 percent of their revenue from app-based orders. “With free delivery services becoming more common, franchise owners are bearing an even heavier burden,” a Lotteria spokesperson said, adding that the dual pricing policy was implemented to alleviate these costs.

Lotteria plans to offer incentives for customers who use its own app, Lotte Eatz, but consumers will still face hurdles. To qualify for free delivery, for example, customers must meet a minimum order of 14,000 won. The app also offers a “pick-up order” option, but its popularity remains limited.

Lotteria emphasized that this decision was made after discussions with the franchise industry association, explaining, “We are working closely with our franchisees to ensure their profitability in an evolving delivery market, and will ensure customers are well informed of the new pricing through multiple channels.”

The dual pricing model has quickly become the new standard in Korea’s food industry. KFC increased the price of its burger sets by 300 won for delivery in March 2024, with side items costing an additional 100 won. Similarly, McDonald’s now charges up to 1,300 won more for its delivery menu compared to in-store prices, with a Big Mac set costing 8,500 won via delivery apps versus 7,200 won in-store. Burger King has followed suit, increasing delivery prices by as much as 1,400 won, while budget coffee chains like MegaMGC Coffee and Compose Coffee are charging an extra 500 won for delivery orders. This trend is not limited to large chains; small independent restaurants are also marking up their delivery prices by 500 to 1,000 won per item.

Restaurant owners argue that these changes are necessary to stay afloat as platform fees continue to increase. Korea’s largest delivery apps, Baemin and Coupang Eats, both charge a 9.8 percent commission on every order. Yogiyo charges a similar 9.7 percent, and even when customers pick up their orders themselves, platforms like Baemin still take a 3.4 percent fee while Yogiyo charges 7.7 percent. On top of this, restaurant owners must also pay delivery fees, payment processing fees, and VAT, leaving them with razor-thin margins. “Even if I sell 25,000 won worth of food, over 5,000 won goes toward delivery-related expenses,” a restaurant owner in Euljiro, Seoul said. “With ingredient prices and utility costs on the rise, it is impossible to make ends meet without increasing delivery prices.”