1 in 6 restaurants closed this year as small business crisis deepens — 'Harder than COVID'

Closure rate for food service businesses hits 17.54% in first five months of 2026; high interest rates, weak domestic demand and delivery app fees compound the pressure; small business owners take to the streets

A vacant commercial space in Seoul. [Yonhap]

Big data analysis shows that one in six food service businesses across South Korea has closed so far this year. Self-employed operators who had held on through government financial support and hopes of a consumption rebound are increasingly shutting down, squeezed by high interest rates, the prolonged war in the Middle East, a persistent slump in domestic demand and the rising cost of online food delivery platforms. Small business owners have recently taken to the streets in protest, demanding the right to survive.

1 in 6 food service businesses has closed

An analysis of nationwide food service closure data through fintech firm Finda's commercial district analytics platform OpenUp found that the provisional closure rate for food service businesses stood at 17.54% for the January–May period this year.

The closure rate edged down from 14.24% in 2020 to 13.75% in 2021 before climbing back to 14.20% in 2022, then rising consistently to 16.62% in 2023 and 17.86% in 2024. Last year's full-year figure reached 17.88% — higher than at the peak of the COVID-19 pandemic. Even compared with 2020 and 2021, when the food service industry was hit hardest by social distancing rules and operating restrictions, the closure rate has risen by more than 3 percentage points.

Trend in nationwide food service business closure rates. [Image created using ChatGPT]

Analysts attribute the trend to a combination of prolonged economic stagnation, weakening consumer spending and mounting costs for raw materials, labor and rent. Delivery platform fees and advertising costs are also cited as factors eroding profitability for self-employed operators. Song Chi-young, chairman of the Korea Federation of Micro Enterprise, said: "The biggest cause is the persistently high-cost structure driven by elevated interest rates, a weak won and rising prices." He added: "It has been a long time since people started saying business is harder than during COVID-19. The capacity to hold on is disappearing."

By region, conditions were particularly severe in the greater Seoul area and some major cities. Gwangju posted the highest food service closure rate in the country at 18.65% for the January–May period, followed by Incheon at 18.52%, Gyeonggi Province at 18.26%, Daegu at 18.05% and South Chungcheong Province at 17.97%. Sejong, where demand from workers at the Government Complex Sejong drives a large food service market, also recorded a closure rate of 17.91%.

Even Gangnam's dining district is shaking

Seoul's overall closure rate stood at 16.51%. Disparities among the capital's 25 autonomous districts were pronounced. Gangseo-gu recorded the highest food service closure rate in Seoul at 18.82% for the January–May period, followed by Mapo-gu at 18.69%, Gwanak-gu at 18.61%, Gangnam-gu at 17.81% and Songpa-gu at 17.60%.

The figures appear to reflect a combination of intensifying competition among businesses and a shift in consumer behavior. The post-pandemic expansion of delivery services has weakened the competitiveness of brick-and-mortar stores, while a surge in new openings has created a cycle in which closures rise in tandem.

Gangnam-gu's 17.81% rate is particularly striking given the district's reputation as an invincible commercial hub. The data suggest that even its prime dining corridors are struggling to absorb fixed costs amid slowing consumer spending, with a growing number of self-employed operators unable to sustain falling sales against high rents and labor costs.

By contrast, Jongno-gu recorded a relatively low closure rate of 13.98%, followed by Jung-gu at 14.02% and Yongsan-gu at 15.06%. A recovery in tourism demand and steady foot traffic from office workers have provided some buffer in those districts, analysts say.

Members of the Korea Federation of Micro Enterprise hold a rally in front of Yeouido's National Assembly station in Seoul on June 9, calling on the government and the National Assembly to overhaul employment policy — including halting the push for a basic labor law and applying differentiated minimum wage standards. [Yonhap]

Small business owners take to the streets

Industry observers increasingly view the rise in food service closures not as a cyclical downturn but as a structural crisis. During the COVID-19 period, policy funding and expectations of a consumption rebound offered some support, but the prolonged high-interest-rate environment and a domestic demand slump have sapped the recovery momentum. A persistently high-cost structure — including minimum wage increases and rising operating expenses — continues to weigh on operators.

Pushed to the brink by deteriorating business conditions, small business owners have taken their grievances to the streets. The Korea Federation of Micro Enterprise held a large rally in front of the National Assembly in Yeouido on June 9, calling for the abolition of the weekly holiday allowance. The Korea Federation of SMEs held a press conference the previous day urging the government to freeze next year's minimum wage at the current level, framing the demand as a matter of survival for small businesses and self-employed operators.

The analysis was based on estimated sales data from Finda's OpenUp platform. The closure rate may be relatively high because the methodology classifies a food service business as closed if it recorded sales in the previous year but none in the following 12 months — even if no formal closure was filed with the authorities.

boo@heraldcorp.com