Burger chains on the menu as business and valuations soar

People walk past a McDonald’s Korea branch in Seoul. [YONHAP]

Fast food in Korea is close to outselling most major burger chains.

The shipping boom offers the possibility of high valuations, and inflation can also help.

Five chains – McDonald’s Korea, Burger King Korea, KFC Korea, Mom’s Touch and Bas Burger – are offered to shoppers. Together they have over 2,300 locations.

The newest to test the waters is Tasters, which operates Bas Burger. She sent letters to companies likely to be interested in the chain, which has 20 outlets. Investment banking sources put the asking price at 100 billion won ($76.7 million).

Affinity Equity Partners, a Hong Kong-based investment firm, has listed Burger King Korea and Japan for sale, and they are targeting a valuation of 1 trillion won. McDonald’s Corporation hopes to raise 500 billion won for McDonald’s Korea. A 79% stake in Mom’s Touch is offered for sale by Korea F&B Holdings for 1 trillion won, and KG is selling KFC Korea for 100 billion won.

The market rush is partly a sign of the times as rising interest rates and the possibility of a recession force investors to unload assets before sales and earnings are hit by the widely heralded storm. .

This is partly a testament to how successful these companies have been over the past few years, feeding people during the pandemic and developing highly lucrative delivery strategies.

Big profits could mean high prices.

McDonald’s Korea posted revenue of 1.06 trillion won in 2021, up 8.2% year on year and a record high. Burger King Korea recorded revenue of 678.4 billion won that year, up 18.7% and also a record high. The fast food chain received 17 million delivery orders last year, up 54% year on year.

As life returns to normal, regular business resumes.

McDonald’s is reporting more customers eating in and speculating that inflation could also help. While people are struggling to make ends meet, burgers can be a good option.

Mom’s Touch is considered to have added value in terms of international expansion. It had two branches in the United States in the first quarter and plans to open six in Thailand by the end of this year.

It also has the advantage of not having to pay royalties to a foreign company.

McDonald’s Korea paid a royalty of 54.3 billion won to McDonald’s Corporation in 2021, up 6.3% year on year. Burger King Korea paid Burger King 32.9 billion won last year, up 21.9 percent year on year.

Brands pay about 5% of their revenue in royalties.

With the intention of branching out into Thailand, Jollibee Foods, which operates the Jollibee hamburger brand in various countries in Southeast Asia, has been named as a potential buyer of Mom’s Touch. But the company denied the allegations through a July 12 regulatory filing.

A branch of Mom's Touch in the Gangseo district, west of Seoul. [MOM’S TOUCH]

A branch of Mom’s Touch in the Gangseo district, west of Seoul. [MOM’S TOUCH]

“We remain open to opportunities, but we are very selective and rigorous with acquisitions,” the filing reads. “With respect to the past few months, Jollibee Foods has had no discussions with any company, formal or informal,” or made any acquisition offer to any company.

Mom’s Touch has 1,354 branches in Korea, more than any other burger or chicken sandwich chain.

“Mom’s Touch branches are small to medium in size, around 20 pyeong to 40 pyeong,” said Kim Jang-yeol, an analyst at SangSangIn Investment & Securities, referring to a Korean measurement unit of 3.3. square meters. “It takes about 100 million won to open a branch, compared to 300 to 500 million won to open branches of rival chains and also has the lowest interior decoration costs, allowing franchisees to open branches easily and with less money.

BHC, which runs fried chicken chain BHC Chicken, was named as one of the potential bidders for Burger King by local media, but the company denied the reports. The main reason was the high price, with Burger King aiming to be sold for around 1 trillion won.

McDonald’s Korea went up for sale in 2016 for 600 billion won but was unable to find a buyer, with bidders including a Maeil Dairies consortium and another led by CJ Corporation due to high prices.

Changing consumer tastes could be a factor in sales efforts. With Shake Shack and Gordon Ramsey Burger hitting the market and Lorton, Virginia’s Five Guys coming to town, the burger market has become much more competitive.

BY LEE TAE-HEE [[email protected]]

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