Major domestic burger franchises are successively entering the M&A (mergers and acquisitions) market. Mom’s Touch and Burger King are reportedly valued at around 1 trillion won, while Frankburger and Five Guys are also seeking new owners. Observers note that variables such as upcoming franchise fee refund lawsuits and disputes arising from regulations strengthening franchisee bargaining power taking effect at year-end will determine corporate valuation.
According to food and franchise industry sources on the 20th, Mom’s Touch major shareholder KL&Partners is pushing for the sale of 100% of its shares. Following a preliminary bidding process at the end of last month, definitive bidding is scheduled for next month.
The corporate valuation cited in the market is around 1 trillion won. Mom’s Touch also attempted a sale in 2022, but it fell through due to a price mismatch. Last year’s consolidated revenue was 479 billion won, and operating profit was 89.7 billion won.
Affinity Equity Partners, the major shareholder of BKR, the operator of Burger King and Tim Hortons in Korea, has also moved to sell all its shares. BKR’s last year EBITDA (earnings before interest, taxes, depreciation and amortization) is cited at approximately 106 billion won, with a corporate valuation ranging from 850 billion to 1 trillion won.
Burger King already operates more than 550 stores, while Tim Hortons is just beginning to expand its footprint. The fact that about 75% of Burger King’s stores are company-operated and Tim Hortons, which has about 40 stores, is also company-operated, means significant burdens from rent and labor costs, which is cited as a factor weighing on the sale process.
Mid-sized and small brands have also come to market. Frank F&B, the operator of Frankburger, is pushing for the sale of management rights with Samil PwC as the lead advisor. The corporate valuation is cited at approximately 73.5 billion won, calculated by adding net debt of 33.5 billion won to an equity value of about 40 billion won.
Genesis BBQ Group, which operates the chicken franchise BBQ, is reportedly considering an acquisition. Frankburger’s revenue decreased by approximately 22% from 2023 to last year, and the number of new store openings dropped from 286 to 93.
Hanwha Galleria is continuing negotiations with H&Q Korea regarding the sale of FG Korea, the domestic operator of Five Guys. In December last year, H&Q was selected as the preferred bidder, and a memorandum of understanding (MOU) was re-signed in June this year. The investment banking industry expects the contract to be signed by the end of next month.
The industry views franchise fee refund lawsuits as a potential obstacle for franchise-centric companies. The Supreme Court finalized a lower court ruling last January that Korea Pizza Hut must return approximately 21.5 billion won in differential franchise fees to franchisees.
The core issue was whether there had been an agreement between the parties regarding the differential franchise fees collected by headquarters for supplying raw and auxiliary materials. 201 Mom’s Touch store owners are also currently pursuing a differential franchise fee lawsuit against headquarters, and it is reported that Frankburger is also facing at least two refund lawsuits.
The implementation of the franchisee business group registration system and headquarters’ consultation obligation under the revised Franchise Business Act starting December 31 is also a key issue.
Contrary to the original intent of amplifying store owners’ voices, franchise industry concerns suggest that lowering the threshold for registering store owner groups could lead to a proliferation of multiple groups, causing conflicting demands and repeated consultations between groups. A franchise industry official said, “Brands with many store owner groups carry conflict risks, which may cause acquirers to avoid acquisition.”
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