Rainy days lie ahead of diners run by conglomerates such as Nongshim and CJ as a state-funded panel is expected to add restaurants to the list of trades deemed suitable for only small and medium-sized companies.

Conglomerates and companies that do not meet the legal conditions for SMEs are restricted from or recommended to refrain from expanding in businesses designated suitable for only SMEs.

Controversy is inevitable in this case, however, since the ball and chain will apply to only domestic companies while foreign restaurant chains such as Pizza Hut and Outback Steakhouse continue to enjoy top market shares.

The National Commission for Corporate Partnership is currently in discussions with the trade association of small diners, and is likely to announce the designation as early as late this month, according to sources in the panel and the industry.

Following bakeries, most of the restaurant industry will fall under the limitations with the exception of hamburgers, which are mostly sold by large firms.

About 30 companies under major conglomerates including Shinsegae Food, Lotteria, CJ Foodville, Nongshim, Our Home, E-Land, Hanwha, Daesung and Maeil Dairies would be the direct targets.

Lotteria Co., for instance, saved its hamburger brand Lotteria from the handicap, but it runs a number of restaurant brands such as TGI Friday’s.

CJ Foodville has about 10 restaurant brands under its wing including bibimbap chain Bibigo, Cheil Jemyunso and China Factory.

Shinsegae Food operates seafood family restaurant Bono Bono and has introduced American hamburger chain Johnny Rockets.

E-Land runs buffet chain Ashley; Daesung has a Korean diner in shopping mall D-Cube City. Maeil Dairy runs Crystal Jade, Manten Boshi, Indian restaurant Dal and a few other small diners.

Restaurant industry sources complain that unlike in the manufacturing sector, where the standards for regulations were crystal clear, it is not easy to set the scope of restrictions for the service sector.

Whereas a handful of franchises dominate bakeries, there is more room for controversy in the restaurant business, they say.

A mid-sized restaurant company named Nolbu, for example, does not belong to any of the conglomerates, but will be subject to regulations because it does not meet the conditions of an SME.

Industry observers note that the envisioned restrictions on domestic firms would only open new doors for foreign companies.

As for the Japanese curry house Coco Ichibanya, restrictions will apply to only restaurants run by Nongshim and not to the Korean arm of the Japanese company.

“Even if a company is over a certain size, they should look into whether it expanded recklessly or focused on foods as its core business with exceptional expertise,” a restaurant company official said.

“It is against market principles to keep only domestic firms in check when global restaurant chains like McDonald’s make tens of billions of dollars.”

As for bakeries, the commission is reviewing banning large franchises from opening new stores within 500 meters from small, non-franchised bakeries and limiting the number of their new stores each year to less than 2 percent of existing stores.

By Kim So-hyun (sophie@heraldcorp.com)