Ceylon Hotel immediately began construction on the M Pizza flagship store.
I toured the interior with CEO Im Soo-mi.
Engineers from M Pizza in the US installed conveyor belts, robotic arms, and monitors. It looked less like a kitchen and more like a manufacturing plant.
When an order comes in, it’s automatically sent to the screens in the kitchen, and the robots recognize which pizza needs to be made.
When a person stretches the dough and puts it on the conveyor belt, a robotic arm sprays and spreads the tomato sauce, puts it in the oven, takes it out, and performs its designated role.
It’s quite a fascinating sight to see in person.
“We’re thinking of making it an open kitchen in the center of the store. So people at the tables can watch the robots moving and making pizzas.”
The Ceylon Hotel flagship store will not offer delivery and will only operate as a dine-in location.
What CEO Im Soo-mi focused on most was the wine. She personally selected wines that pair well with pizza and put them on the menu.
There are some high-priced wines, but most are mid-to-low priced wines in the 30,000 to 50,000 won range. It’s aimed at the younger demographic.
CEO Im Soo-mi said confidently.
“The opening of M Pizza will be a big help in attracting young and family customers.”
“Will it be successful?”
“Of course. It’s not just the taste, but the fact that it’s robot-cooked pizza is an excellent marketing point. The response on the internet and social media is already explosive. Franchise inquiries are pouring in.”
We moved to the coffee shop on the second floor of the hotel.
CEO Im Soo-mi took a sip of her coffee and asked.
“What are your plans for Meister Pizza?”
“I’m not sure yet.”
I’m still thinking about what the best course of action is.
M Pizza will shake up the Korean pizza market, just like it did in the US. Meister Pizza, being a latecomer, will be directly hit the hardest.
This is strictly business, and we need to hold them accountable for what happened before.
The stage for resolving things amicably has already passed.
I said to CEO Im Soo-mi.
“Rather than that, can I make a suggestion about employee recruitment?”
“Yes, please do.”
After hearing my suggestion, she readily nodded.
“Of course. We’ll proceed with that according to CEO Kang Jin-hoo’s suggestion.”
***
Kim Jae-hak got the title of the first franchise location.
The Meister Pizza location number 15, which he had been running until a few days ago, closed down. When they looked to open a new store in its place, the location wasn’t good and the space was too small. So, OTK Company bought the building directly across from Meister Pizza.
The first floor had been vacant for months, and a bedding store was doing a temporary pop-up business, so there weren’t any significant issues in starting construction immediately.
I looked around the construction site with Kim Jae-hak. As expected, the engineers from the US were hard at work.
The oven bikes and oven trucks are also on their way to Korea.
Oven delivery is a core component of M Pizza. Because of this, delivery drivers will all be hired as full-time employees, not part-timers. This will be the case for other locations as well.
Kim Jae-hak looked at the much larger space compared to his previous store and asked me.
“Are you sure I deserve this much help?”
“It’s not like we’re just giving it away; we’re lending it to you.”
“I don’t feel like I’ve done much to deserve this kind of treatment.”
I thought back to that day. Even though quite some time had passed, it felt as vivid as if it were yesterday.
“Haven’t you ever wondered?”
“Wondered what?”
“What it would have been like if our positions had been reversed that day at the training grounds.”
He was the one who loaded the shell. If I had been in his position, I wouldn’t have been able to avoid it, even if I had seen the premonition.
Accidents can happen to anyone. Losing his leg wasn’t his fault.
“So, hang in there. Good things will come.”
Kim Jae-hak smiled.
“Thanks, Jin-hoo.”
I said jokingly.
“If you’re thankful, work hard and pay back every penny.”
***
Just like in manufacturing, economies of scale also apply to franchising.
Because of this, MCK Group was putting all its efforts into opening new Meister Pizza locations. Fortunately, the number of franchisees was steadily increasing, and they were confident they could open an additional 50 stores within the year at this pace.
However, when the news of M Pizza’s entry into the Korean market broke, franchise inquiries suddenly stopped. There were even instances of contracts being cancelled right before signing.
The emergence of a strong competitor franchise made prospective business owners hesitate and weigh their options.
Chairman Choi Dae-ho of MCK Group was flustered.
M Pizza was currently focused on the US market. When he had visited, they were holding off on overseas expansion.
‘But why did they suddenly enter Korea?’
Korea has one of the highest rates of self-employment among OECD countries, and the food service industry, in particular, is fiercely competitive, making it a less attractive market.
He had anticipated that they would expand to larger markets with bigger populations and economies like Europe or Japan first, so he expected it would take considerable time before they entered Korea.
He had been trying to establish a solid foundation in the meantime, but they had partnered with Ceylon Hotel and made a surprise entry!
While he was trying to understand the situation, an employee working at Meister Pizza headquarters reported a shocking fact.
After hearing the report, Choi Dae-ho was so surprised that he immediately called his son.
A little later, when Choi Myeong-ho entered the chairman’s office, he asked directly.
“I heard Kang Jin-hoo came about a franchisee matter?”
Choi Myeong-ho frowned.
‘Damn it. Who told him?’
He had no choice but to explain the situation at the time. Of course, he left out the part about the verbal abuse and grabbing the collar.
“A franchisee came to complain, and Kang Jin-hoo showed up and took him away?”
“Yes.”
“What’s the relationship between the two of them?”
“Well… the franchisee was Kang Jin-hoo’s senior in the military.”
Choi Dae-ho roared.
“Why are you telling me this now!”
Choi Myeong-ho said defensively.
“I didn’t know.”
How would he know who a franchisee’s military junior was? It’s not like the guy went around advertising that he served with Kang Jin-hoo.
Choi Dae-ho was meticulously overseeing all aspects of the business, acting on behalf of his still young son. He was also the one who instructed them to open a directly managed store across the street.
‘Did the franchisee ask Kang Jin-hoo for help, and that’s why he brought M Pizza to Korea? Is he trying to kill Meister Pizza?’
He thought the possibility was low, but the timing was exactly right.
MCK Group is a publicly traded company on the KOSDAQ with five subsidiaries. Its market capitalization is about 500 billion won, making it one of the top three franchise companies in the industry, excluding major conglomerates.
However, compared to OTK Company, it’s like a neighborhood chicken shop.
Who is Kang Jin-hoo?
He’s a hero who saved the United States from an earthquake and is the wealthiest person in the world, surpassing even South Korea.
More importantly, no one who has gone up against Kang Jin-hoo has ever come out on top.
Han Min-goo, chairman of the second-largest conglomerate in Korea, resigned in disgrace. The Director of the National Intelligence Service and the Prosecutor General were fired, and Hoseong Savings Bank went bankrupt. Even a former president is currently imprisoned and awaiting trial.
Choi Dae-ho felt cold sweat trickling down his back.
‘What bad luck to run into Kang Jin-hoo of all people!’
***
I had a separate meeting with the franchisees of Master Chicken and Meister Pizza. It was Kim Jae-hak who gathered these people.
Taek-gyu and Ellie also joined the meeting.
Before coming to the meeting, Ellie meticulously reviewed Korea’s Fair Trade Act and Franchise Business Act, as well as various related laws.
Once the franchisees sat down, no one spoke easily. They were worried that saying something might cause disadvantages from the headquarters.
In principle, the relationship between the headquarters and franchisees is a partnership. If the headquarters does well, the franchisees do well, and vice versa.
However, when the headquarters starts to abuse its power, it turns into a hostage situation.
If you try to subdue the hostage-taker, the hostage is put in danger beforehand. Therefore, the hostage has no choice but to cooperate, even though they know the hostage-taker is bad.
In reality, if problems arise with the brand and a boycott occurs, the franchisees, not the headquarters, are the ones who suffer the most.
If they were able to make a decent living from running their franchises, they wouldn’t have come to this meeting in the first place.
I looked around at them and said.
“I’ll take responsibility if any issues arise from this. And if you close your store, I’ll help you get a job at M Pizza or open an M Pizza franchise. So please, feel free to speak openly.”
At my words, the franchisees began to speak up one by one.
Franchises have so-called ‘essential items’ that they must purchase exclusively from the headquarters or designated suppliers.
It is natural for the headquarters to supply ingredients to maintain uniformity in taste and quality across all locations.
The problem here is twofold.
One is that they are forced to purchase items that have nothing to do with quality solely from the headquarters, and the other is that the prices are ridiculously high.
It’s somewhat understandable for essential ingredients like seasoned chicken, dough, and various sauces to be supplied by the headquarters. But even products that can be easily obtained on the open market, such as boxes, chopsticks, tissues, plastic bags, and cooking oil, must be bought from the headquarters.
Unlike individual stores, franchise headquarters can make bulk purchases, allowing them to buy below wholesale prices. Nevertheless, the goods they supply to franchisees are more expensive than market prices.
Of course, they come up with all sorts of reasons, such as differences in quality and processing costs, but franchisees have no idea why the prices are 1.5 to over 2 times higher than wholesale.
As one person started talking, it was like a floodgate opened. All sorts of cases of abuse of power poured out.
“Do you know how many containers of cooking oil a chicken restaurant uses in a day? But the price of cooking oil is really too high. You can buy it for 10,000 won at the supermarket, but we have to buy it for 17,000 won from the supplier.”
“They hand out umbrellas and calendars for ‘marketing’ and make the franchisees pay for all the costs.”
“They collect advertising fees every season, but isn’t this originally something the headquarters should be responsible for?”
“They make a huge stack of flyers and hand them over before charging us for them. I didn’t even distribute them all and threw them in the recycling bin.”
“If business seems to be doing well, the headquarters comes and keeps forcing us to renovate.”
“Renovations can only be done through contractors the headquarters has contracts with, and the costs are unbelievable. When I said I couldn’t afford it, they told me to take out a loan.”
Ellie said with a look of disbelief.
“They really do everything imaginable.”
But there’s one company that keeps coming up: MCK Wholesale.
MCK Wholesale is a subsidiary of MCK Group that exclusively supplies ingredients to all the franchises within the group.
Seasoned chicken and sauces for Master Chicken, and dough, cheese, and toppings for Meister Pizza, all pass through MCK Wholesale before reaching the franchisees.
The largest shareholder is Choi Myeong-ho, who owns a whopping 87 percent of the shares.
The name is Wholesale, but the prices rival or exceed Retail prices. In fact, it’s no exaggeration to say they’ve grown by bleeding the franchisees dry.
So far, so good. But thinking about it, there’s one strange thing.
Why didn’t the headquarters run this profitable business directly? Their profits would have been much higher.
“This is embezzlement, right?”
Ellie nodded.
“It’s clear embezzlement. It’s like MCK Wholesale is pocketing the profits that should have gone to MCK Group. That means MCK Group shareholders have suffered losses. It’s also a violation of the Fair Trade Act.”
Inserting a distribution company in the middle like this to collect a toll is a common tactic used by Korean conglomerates.
Anyway, they’ve learned all the bad tricks.
Verbal abuse or assault can be appealed to public opinion, but the penalties are weak. In the case of simple assault, they don’t even file charges if there’s an agreement.
However, embezzlement can lead to imprisonment depending on the amount. If we investigate, I bet we’ll find embezzlement too.
While we were in the middle of talking, Team Leader Jung Gi-hong came in and reported to me in a low voice.
“The CEO of Meister Pizza is here to see you.”
