Dual pricing scheme by restaurants spark controversy

A ‘dual pricing scheme,’ where prices shown on delivery apps are higher than the in-store price, is becoming more commonplace, especially among large franchise restaurants. Lotteria, a burger franchise, decided to raise delivery order prices by 700-800 won for single items and 1,300 won for set prices beginning on Tuesday. The practice has been adopted at other burger franchises, such as McDonald’s and Burger King, as well as individually-owned restaurants.

Franchisees and restaurant owners claim that price increases are inevitable due to delivery cost burdens. The issue is that consumers are not properly informed of the different prices, which can be deceiving by violating consumers’ rights to be informed and to choose. When the Korea Consumer Agency investigated 34 restaurants in Seoul last year, 20 restaurants operated dual price schemes, of which 13(65%) did not inform consumers of different prices. Another issue is that a higher delivery price per menu item would significantly raise consumer burdens than paying a flat delivery fee.

Delivery platforms that unilaterally raised delivery fees are also accountable for the increased adoption of the dual pricing scheme. This year, delivery platforms competitively waived customer delivery fees while raising the commission rate imposed on store owners by 44%. According to a survey by the Federation of Small Businesses, for every one million won earned by store owners through delivery app orders, 240,000 won is paid to the platform as brokerage fees, payment fees, delivery fees, advertising fees, etc.

Recently, the conflict has intensified as the franchise industry has threatened to report delivery platforms to the Fair Trade Commission. It is noted, however, that there is not much consideration for consumers. Delivery apps have been offering free delivery as if they are doing a favor to consumers, but they have passed the burden on to store owners. Store owners who criticize such practices also charge customers ‘hidden prices. The brunt is borne on consumers who had considered the service free but paid.

In a world where delivery services have become commonplace, delivery fees are costs that must be covered, whoever that may be. The problem is that there have been no discussions about who should pay how much and what is adequate. A dialogue channel consisting of delivery app operators and self-employed groups has operated since July, but no progress has been achieved due to conflicting views. The government should not just stand back claiming self-regulation but try to bring both sides together by seeking consensus.