3/28/13

Government causing problems: Caffe Bene


According to the Korea Herald:
Caffe Bene, the nation’s largest coffee shop franchise, has started cutting jobs and executive salaries, blaming regulations against expansion of its bakery and restaurant chains.

Then a funny thing happened on the way to a seemingly bland story: There was actual talk about the Korean government playing a role in damaging Caffe Bene's business. Not just a throwaway line or a final comment at the end of the article, but actually tying the business's problems to the Korean government's policy.
Caffe Bene took over bakery chain Mainz Dom in December despite the National Commission for Corporate Partnership’s advice to reconsider the acquisition as the panel was discussing restricting bakery franchises. The state-funded commission last month designated bakeries and restaurants as “SME-only” businesses, barring franchises to keep from opening too many stores or within 500 meters from small bakeries. Large companies in the dining industry including Caffe Bene, which runs Black’smith, were also told not to open more restaurants.
A company wants to expand, but the government steps in to block it.

Ludwig von Mises wrote in the 1956 book Anti-Capitalist Mentality that one reason people despise capitalism is that it takes away the excuse for failure. When you have a king or some other person making decisions about your life, then you can blame that person. But when you are on your own, in a free economy? Then you can only blame yourself for your failures. When others succeed where you fail, then in a free economy, it is unpleasant to consider that you are to blame. So people are more comfortable with having a scapegoat rather than evaluating their own decisions.


It is possible that Caffe Bene's management made bad decisions--mainly, thinking that the South Korean government was actually interested in companies that attract customers being allowed to thrive. It is clear that the government screwed up their plans, putting up unnecessary barriers. 
“Our plans to expand Mainz Dom and Black’smith restaurants this year were altered due to the commission’s decision,” said Caffe Bene spokesman Kim Dong-han.
“Mainz Dome, which has 20 stores, cannot open a new store because the panel limited the number of stores a bakery franchise can open per year to only 2 percent of existing stores. Black’smith, which we started in November 2011, can’t expand further, either.”
As Thomas Sowell has written: What is politically defined as economic “planning” is the forcible superseding of other people's plans by government officials.

Actress Han Ye Seul opened a Caffe Bene in Los Angeles--out of the reach of South Korea's busybody politicians.

CJL