Many restaurants in South Korea have adopted restaurant tech services such as table-ordering systems and reservation apps to cut labor costs, but fees for using these services have been steadily rising. Initially marketed with promises of “zero fees,” these tech companies have gradually started raising fees or adding extra charges.
Critics point out that these companies are beginning to resemble delivery apps, which are notorious for profiting from commissions after making small business owners dependent on them. There are around 2 million self-employed restaurateurs in the food service industry nationwide.
Small business owners using restaurant tech services often incur substantial sunk costs in the form of initial installation fees that can amount to several million won. They are locked into contracts that typically last two to three years, and if they terminate their contracts early, they face penalties.
Additionally, customers have grown accustomed to the convenience of these services, making it nearly impossible for restaurants to opt out. “If we raise menu prices even a little, customers complain, but when these tech companies hike their fees, we’re powerless,” lamented a restaurateur.
Mr. A, who runs a bunsikjeom, or snack bar, in Daejeon with an average monthly sales of 30 million won ($22,000), installed a tablet-ordering device earlier this year to reduce labor costs. He had been paying around 800,000 won monthly for a part-time worker who worked 20 hours a week.
At first, the advertised fee of 10,000 won per month for the device seemed affordable, but additional fees soon piled up, ultimately surpassing what he had been paying in wages. He now faces monthly fixed costs of over 1.1 million won, including 750,000 won for the device, 300,000 won in service fees, and 76,000 won for internet connection. He also had to pay 2.6 million won upfront for installation and accessories. “The after-sales service is slow, and they charge you for repairs. If I had known, I would have kept the part-time staff,” he said.
Since restaurant tech companies act as intermediaries between restaurants and customers, attracting a large user base is key to their success. So, these companies initially attracted users with promises of free services or no fees. But as the customer base grew and restaurants became more reliant on these services, they began breaking these promises. Pass Order, which once promised 0% commission fees, began charging a service fee of 6.5%, including VAT, in 2022. Payments made via Pass Order now come with a 2.4% card transaction fee.
Tabling, a service that allows customers to queue remotely, was initially advertised as free except for installation costs but has recently raised its monthly usage fee to 99,000 won. Table Order, which allows customers to browse menus and place orders from a tablet at their table, now charges a 2.5% service fee per month and a payment transaction fee.
Despite rising costs, the number of self-employed restaurateurs adopting technology to manage reservations and automate ordering continues to grow. According to the Korea Rural Economic Institute, the percentage of restaurants using unmanned ordering systems in Korea increased more than fourfold, from 1.5% in 2019 to 7.8% in 2022.
Table Order, which launched in 2019, surpassed 20 million monthly active users as of January last year, while Pass Order now has 1 million members. The reservation app CatchTable serves over 7,000 restaurants and has 3 million users.
