Retail

South Korean Bakery Rises To North American Markets

S. Korean Bakery Rises To North American Markets

“The Starbucks of South Korea” is expanding its footprint in North America. Coming under the unlikely but battle-tested name of Paris Baguette, the casual pastry and coffee chain is entering new markets with a decidedly international approach.

The chain has almost 3,500 stores in South Korea, and its parent company, SPC Group, is also in Vietnam, Singapore, China and other Asian countries. Its value proposition – and the one that Gregg Koffler, vice president of franchise sales and development at Paris Baguette America, believes will give it a leg up in North America – is a combination of convenient locations, premium coffee and fresh pastries. Anyone who has ordered a microwavable chocolate croissant from Starbucks is among the potential customers Koffler would like to convert.

The primary demographic for Paris Baguette is the Asian neighborhoods in major U.S. cities. The franchising program has been a success there, according to Koffler. Next up, the company will aim for a broader audience in more cities, including Alexandria, Virginia; Atlanta, Georgia; Dallas, Texas and Portland, Oregon.

According to Restaurant Business, in 2019, Paris Baguette did $152 million in sales from 81 U.S. locations. The numbers place the chain ahead of Bruegger’s Bagels and behind its rivals Au Bon Pain, Pret a Manger and Le Pain Quotidien, which recently filed for bankruptcy.

Le Pain Quotidien sold all of its 98 U.S. locations for just $3 million to New York-based food brand Aurify, which operates the Melt Shop, Fields Good Chicken and Five Guys’ New York City locations, Nation’s Restaurant News reports.

Aurify plans to reopen at least 35 Le Pain Quotidien locations in the U.S., though reports didn’t say how many would be in New York City. According to Eater NY, “the office lunch chain, which has been struggling for years now due to increased competition from places like Pret a Manger and Dig, closed all of its locations after the novel coronavirus pandemic hit in March, and laid off all of its nearly 2,500 staffers.”

While Paris Baguette is expanding in the lower 48 states, Koffler is currently focused on Toronto and the rest of Canada.

“Our footprint is smaller than our competitors, and that allows us to have more access to real estate,” he noted. “We don’t need a drive-through, so that – along with the fact that we bake our pastries and our breads fresh daily – is a huge point of differentiation for us. It allowed us to have a strong business in the U.S. in terms of average unit volumes, and that's going to translate well into the Canadian market. Our tailwinds are really great food, the strength of our brand and the strength of our parent company in terms of capitalization.”

Is it a tough time to expand a franchise? Koffler believes that history demonstrates a positive outlook. He cited a post-2008 recession study in the Journal of Economics & Management Strategy, which reported the largest increase in entrepreneurship of any period in recent U.S. history. In addition, more than half of Fortune 500 organizations got their start during previous recessions on bear markets.

“Though the restaurant industry is facing unique challenges, we’re seeing positive steps being taken to support our industry and business owners,” Koffler said. “Specifically, we’re seeing a more open and collaborative real estate market right now, which presents the potential for greater selection and better lease terms for our franchisees. In addition, banks are offering business-friendly rates and products to encourage economic growth. As a result, we are bullish about the long-term prospects of owning a Paris Baguette franchise, and [we] believe the short term presents positive advantages for potential franchisees to consider.”

Koffler is not looking at the COVID pandemic as a headwind at this time. A good bit of that optimism comes from the real estate market. “It's an opportunity because great real estate is going to be available,” he noted. “We're well-positioned to take advantage of that. If a franchisee signs a deal with us now to build a number of stores, realistically, those stores might not open for nine months to a year. And by that time, we’ll be in much better shape than we are currently.”

The SPC Group is a huge Korean conglomerate specializing in food and confections. It operates 12 subsidiaries, including Paris Baguette. An “industry source” told The Korea Times last week that it aims to open a restaurant to improve the company's reputation in the U.S. market.

"There's a limit for its success with the confectionery business in the United States and Europe. It is very hard to break the stereotype that an Asian bakery can offer better products than French bakeries," the source said. "Becoming successful with Maison de PB in NYC is also important, but we can see it as part of the group's efforts to build its brand image there."

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