"President’s Criticism of Expensive, Tasteless Rest Area Food Shakes Up the Concession Market"

Government’s Shift to Public Management of Rest Areas Puts Pulmuone, Samlip, and Others on Alert

As the government has decided to convert the operation of highway rest areas to public management, a major transformation is expected in the so-called concession market, where food and beverage (F&B) outlets are operated and managed within rest areas. By establishing a public management company, reducing intermediary fees, and lowering food prices through a new business model, the distribution, food, and dining industries—which have significantly expanded their presence in the highway concession market over recent years—are increasingly on edge.

According to industry sources on July 15, the Ministry of Land, Infrastructure and Transport recently announced a plan to establish a public management company to operate rest areas. This company will directly contract with businesses that set up shops, shifting away from the previous system. Previously, intermediaries who secured operating rights through Korea Expressway Corporation bids negotiated with individual vendors. During this process, intermediary fees ranged from an average of 3% up to 51% of sales, leading to higher food prices, declining food quality, degraded service, and difficulties for value-oriented brands to enter the market, according to the government.

According to the Ministry, most highway rest areas along national toll roads are built by Korea Expressway Corporation and leased to the private sector. Of the 211 rest areas, 194 operate as private leases, while 11 are managed by companies that initially signed contracts in the 1970s and 1980s and have operated for over 40 years.

The government stated that, starting this month, the Korea Expressway Corporation will issue bids for eight newly established or soon-to-expire rest area contracts, and begin temporary operations starting in December. This marks a rapid transition ahead of the official establishment of the public management company next year. The public management company is expected to secure operating rights for each rest area as contracts with current intermediaries expire. A Ministry official explained, "We expect to manage around 100 rest areas next year, and subsequently, we will take over as contracts expire. Ultimately, the public management company aims to manage 80-90% of all highway rest areas."

As a result, companies in the distribution, food, and dining sectors that have pursued concession businesses by securing operating rights for rest areas are now closely monitoring the situation. Among the roughly 210 rest areas under the jurisdiction of the Korea Expressway Corporation, several dozen are operated by large distribution, food, and dining firms. Notably, Daebo Distribution operates 30 rest areas, Pulmuone 28, Samlip 9, BGF Retail 2, Ourhome 2, and CJ Freshway 1, totaling to more than 70 sites. Green Express, a joint venture established by Pulmuone, Paris Croissant, and KH Energy, is also in the business of highway rest area operations.

Historically, up until the early 2000s, highway rest areas were run by the Highway Management Corporation, a subsidiary of the Korea Expressway Corporation. However, privatization in 2002 led to outsourcing of operating rights to private companies, further expanding the market. Distribution, food, and dining companies have actively participated in the highway concession business for over a decade. Those that felt limited in metropolitan markets used their capabilities in dining and distribution to secure operating rights for high-traffic, so-called "popular" rest areas—sites with significant sales volumes.

These companies have generated profits by collecting rent from tenant businesses and directly operating F&B outlets. Typically, they simultaneously bid for highly profitable rest area operating rights and lower-margin gas station contracts. In general, rest area contracts range from as short as 5 years to several decades in duration.

For example, Pulmuone’s subsidiary, Pulmuone Food & Culture, generated KRW 346.8 billion in revenue last year from rest area concession and gas station operations. This accounted for roughly 38% of Pulmuone Food & Culture’s total annual revenue, with relevant sales increasing by 34% over the past three years. Daebo Distribution, the rest area operator of Daebo Group, which also manages Daebo Construction and Seowon Valley Country Club, recorded KRW 82 billion last year from rest area operations alone. In the same year, revenue from gas station operations amounted to KRW 282.3 billion. Daebo Distribution’s gross profit margin from rest area business reached as high as 50%.

The industry generally believes that, since most contracts are long-term, there will not be an immediate significant impact on operations. Furthermore, circumstances vary within the industry depending on contract types. Beyond companies directly contracted with the Korea Expressway Corporation, some operators—such as those supported by financial institutions like Macquarie—run rest areas based on their own operating rights. Major rest areas with top sales nationwide, such as Haengdamdo Rest Area, Deokpyeong Natural Rest Area, and Majang Premium Rest Area, are owned by Macquarie and have been developed using a private capital hybrid model. Their operating right contracts will not expire until at least 2033.

However, as the government is rolling out policies to reduce rent and various fees within highway rest areas, there is a growing perception that the overall profitability of rest area concession businesses will decline. This policy shift was prompted by President Lee Jaemyung’s remarks about rest area food prices last December, as well as mounting criticism of “revolving door” practices involving Korea Expressway Corporation retirees influencing the management of rest areas. For these reasons, the transition to public management for rest areas is considered inevitable, and fee reductions are widely expected.

An industry insider commented, “For now, we have not received any direct communication from the government, so we are watching the situation carefully. With the public management company likely to take the lead in rest area operations going forward, we will need to closely examine the bidding announcements and operating conditions as they are released.”

This content was produced with the assistance of AI translation services.