Soaring Ingredient and Labor Costs Hit Restaurant Industry Hard... Food Business Owners 'Raise Their Hands'

Rising Prices for Major Dining-Out Menu Items Such as Gimbap, Naengmyeon, and Kimchi Jjigae

Ingredient and Labor Cost Increases Outpace Sales Growth

Number of Restaurant and Snack Bar Operators Nationwide Continues to Decline

Due to the impact of sustained high inflation, food prices have risen, and increases in labor and energy costs have also contributed to a continuous upward trend in restaurant prices. As these costs have grown, consumers have become increasingly burdened and have begun to cut back on related expenses, leading to a deterioration in the restaurant industry’s overall business environment.

An outdoor menu board is posted at a restaurant in Myeongdong, Jung-gu, Seoul. Photo by Yonhap News Agency

According to the ‘Price Navigator’ portal by the Korea Consumer Agency on September 26, the nationwide average price for a serving of Kimchi Jjigae set meal last month was KRW 9,043. This marks a 3.5% increase from KRW 8,733 during the same period a year earlier. This figure is the simple average of item prices compiled across 16 provinces and cities by the Korea Consumer Agency.

Daejeon had the highest average price for Kimchi Jjigae set meal, at KRW 10,600, while Gwangju, Jeollanam-do recorded the lowest at KRW 8,278. In Seoul, the average price surpassed the KRW 7,000 level in October 2021, the KRW 8,000 level in December 2023, the KRW 8,500 level in February 2025, and rose even higher last month to KRW 8,654.

Based on Seoul prices for major dining-out menu items: naengmyeon was KRW 12,692 last month, up KRW 269 from a year ago. Bibimbap rose by KRW 231 to KRW 11,769. Samgyetang climbed by KRW 192 to KRW 18,192, and samgyeopsal (200g, converted) increased by KRW 750 to reach KRW 21,321. Jajangmyeon was KRW 7,230, up KRW 236 (3.4%) from the previous year. Kalguksu and gimbap were KRW 10,038 and KRW 3,869, rising KRW 346 and KRW 246, respectively, compared to the same period last year.

An outdoor menu board is posted at a restaurant in Myeongdong, Jung-gu, Seoul. Photo by Yonhap News

The increase in the prices of these menu items is closely tied to rising costs for ingredients and wages. In fact, according to the ‘Restaurant Management Status Survey Report’ published annually since 2016 by the Ministry of Agriculture, Food and Rural Affairs and the Korea Rural Economic Institute (KREI), the average cost of ingredients for ordinary restaurants rose from KRW 58.73 million in 2015 to KRW 103.77 million in 2024, a 1.8-fold increase over nine years. As a result, the proportion of costs for ingredients as a share of total sales exceeded 40% for the first time at 40.4% in 2023, and reached an all-time high of 40.7% in 2024.

During the same period, average labor costs rose from KRW 28.73 million to KRW 78.98 million, a 2.7-fold increase. In contrast, the average annual sales of food service businesses increased by only 1.7 times, from KRW 148.83 million to KRW 255.26 million. As the rise in ingredient and labor costs outpaced the increase in sales, profitability declined. The operating margin for ordinary restaurants fell from 11.6% in 2022 to 8.9% in 2023, dropping below the 10% level, and further to 8.7% in 2024. Compared to the operating margin of 25.4% in 2015, this means that profitability has declined to around a third of its level nine years ago.

With the worsening restaurant management environment, the number of business operators in related sectors has also decreased. According to the National Tax Service’s National Tax Statistics Portal, among the top 100 daily life business sectors such as retail, food & beverage, lodging, and services, the number of other types of restaurants nationwide dropped by about 4.6% year-on-year, from 18,285 in July of the previous year to 17,450 this July. The number of Korean restaurants decreased by 1.5% to 403,299, while snack bars specializing in items such as gimbap declined by about 5.2% to 47,608. In addition, as alcohol consumption declined, the number of operators of pubs and beer halls nationwide fell by more than 9% in a single year.

An industry insider commented, “As food prices are a sensitive part of daily life, increases in dining-out menu prices inevitably lead to customer attrition. Even in a situation where the burden of ingredient and labor costs has grown, small business owners are unable to fully reflect these increases in their prices, and this results in significant hardship.”

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