"Should we keep using V?"
Compose Coffee is canvassing franchise owners nationwide as it pushes to renew its advertising model contract with V, a member of BTS. With franchisees required to shoulder 79,000 won per month in advertising costs, opinions among store owners are divided.
According to industry sources Tuesday, Compose Coffee is currently holding a vote among franchise owners nationwide on a proposal to approve advertising spending, including the renewal of V's advertising model contract.
Under the Franchise Business Act, revised in 2022, a franchise headquarters must obtain majority approval from all franchise owners to carry out advertising in which store owners also bear part of the cost. The vote's outcome effectively determines whether the contract with V will be renewed.
The contract period runs one year, from July this year to June next year. The total expected advertising expenditure included in the proposal is 7.35 billion won. The amount covers the model fee as well as advertising production and broadcasting costs and online and offline marketing expenses.
Of the total advertising cost, 60 percent, or 4.41 billion won, is borne by headquarters, while the remaining 40 percent, or 2.94 billion won, is shared by franchise owners. The burden per store comes to about 79,000 won per month.
Compose Coffee explains that the advertising cost burden has actually decreased from last year. In 2024, the first year V was selected as a model, expected advertising expenditure was 6 billion won, and last year it grew to around 10 billion won. The 7.35 billion won proposed this year is 2.65 billion won less than last year.
"We made advertising operations more efficient, reducing the overall advertising cost from the previous year and lowering franchise owners' monthly burden by about 11.3 percent," a Compose Coffee official said. "Headquarters bearing 60 percent of the total advertising cost is a high level compared with the industry."
On the other hand, some store owners question the advertising's effectiveness rather than its cost. Nationwide advertising may help boost brand awareness, but it is difficult to confirm how much it actually translated into sales increases at individual stores. Some also question whether it is appropriate to charge all stores the same cost when commercial districts and customer bases differ.
In fact, the 79,000 won per month that store owners must pay corresponds to the sales of about 53 cups of Americano, based on a price of 1,500 won. Once raw material costs, rent and labor costs are excluded, the burden felt by store owners is even greater, critics point out.
This is not the first time a low-cost coffee brand has shared the cost of a star model's advertising with franchise owners. In 2023, Mega MGC Coffee pursued a plan in which headquarters and franchise owners would each bear half of the 6 billion won in expected advertising expenditure. At the time, the monthly burden per store was around 120,000 won.
Compose Coffee says it raised the headquarters' share to 60 percent and set the per-store burden lower than that.
