South Korean restaurant chains are accelerating their expansion into Hong Kong. From Feb. 25 to 27, a delegation of 12 South Korean food and beverage (F&B) franchise companies, including Jiho Hanbang Samgyetang, King Kong Budaejjigae, and Palgakdo, visited Invest Hong Kong with support from the Hong Kong Economic and Trade Office. The delegation explored potential joint ventures with Hong Kong-based restaurant companies and toured local markets, such as Central Market, for possible store openings. Among them, Jokbal Yasijang & Mucheong Gamjatang plans to open a branch in Hong Kong within the next few months.
This is not the first time South Korean restaurant brands have attempted to enter the Hong Kong market. In the 2000s, the success of the Korean drama “Jewel in the Palace” in Chinese-speaking regions led to the opening of Korean restaurants such as Sorabol in Hong Kong. In the 2010s, the surge in popularity of “My Love from the Star” fueled the expansion of Korean fried chicken franchises like BHC. However, many businesses eventually shut down due to high rent and the impact of the COVID-19 pandemic.
Despite past challenges, South Korean restaurant brands are once again targeting Hong Kong, drawn by its growth potential compared to the stagnating domestic market. While Hong Kong’s population is only 7.5 million, its market size surpasses 50 million when factoring in foreign tourists. Last year, about 45 million tourists visited Hong Kong, three times South Korea’s 16 million.
Hong Kong’s sensitivity to shifting trends and its straightforward tax system make it an attractive entry point. South Korean companies are using Hong Kong as a testing ground before expanding into mainland China or other markets. In Hong Kong, companies with annual taxable income under 2 million Hong Kong dollars ($ 370 million Korean won) pay a corporate tax rate of just 8.2%, and there are no value-added tax (VAT), liquor tax, or customs duties.
Hong Kong’s expanding restaurant market, facilitated by high-speed rail and the Hong Kong-Zhuhai-Macao Bridge, is another key factor drawing interest from South Korean food service companies. The Chinese government is pushing forward with the Greater Bay Area (GBA) initiative, integrating Hong Kong, Macau, and nine cities in Guangdong Province into a unified economic zone. With a population of 86 million, the GBA boasts the highest per capita GDP in China.
“With overseas travel restricted during COVID-19, the restaurant industry, especially Korean restaurants benefiting from a positive K-culture image, experienced significant growth,” said Lee Jong-seok, chairman of the Association of Korean Restaurants in Hong Kong. “Since the pandemic, increased movement between Hong Kong and other GBA regions has further expanded opportunities for Korean businesses.” Last month, Kyochon Chicken opened its first store in the new MixC shopping mall in Shenzhen, one of the key cities in the GBA.
This expansion is expected to gain further momentum with the Closer Economic Partnership Agreement (CEPA) between China and Hong Kong. Under the second amendment signed last October, Hong Kong companies will face fewer restrictions on ownership and business scope when setting up operations in mainland China. Additionally, qualification requirements for Hong Kong professionals offering services in the mainland will be eased. This will make it easier for South Korean companies with branches in Hong Kong to expand into the Chinese market.
