The South Korean restaurant franchise merger and acquisition (M&A) market is heating up again. With burger, coffee, chicken, and dessert brands increasingly available for sale, interest from private equity firms and foreign capital is growing. The combination of stable profit structures and the global expansion potential of K-food is drawing attention to restaurant franchises as investment assets.
According to investment banking sources, major burger brands are leading the recent surge in the restaurant franchise M&A market. KL & Partners, the largest shareholder of Mom's Touch, has selected Citigroup Global Markets as the advisor for the sale of its 100% stake. Following an EBITDA of 103.1 billion won last year, the company is valued at around 1 trillion won in the market.
Hong Kong-based private equity firm Affinity Equity Partners has also returned to the market after three years, selecting Deutsche Securities as the advisor for the sale of BKR, which operates Burger King and Tim Hortons. BKR's estimated EBITDA last year was 106 billion won, with a market valuation also around 1 trillion won.
Sales activities for premium and value-for-money burger brands are also picking up. Hanwha Galleria is in final negotiations with H&Q Korea, the preferred bidder for the stake in FG Korea, the operator of Five Guys in South Korea. Recently, FrankF&B, which operates Frank Burger, has also selected Samil PwC as its advisor and joined the sales lineup. Frank Burger operates over 600 locations nationwide and recorded an EBITDA of 6 billion won last year, with a market valuation estimated at about 50 billion won.
Transactions involving coffee and chicken franchises are also accelerating. The global milk tea franchise Gong Cha is set to change ownership as global private equity firm Bain Capital agrees to acquire the global operations from its largest shareholder, TA Associates. The deal is reported to be worth approximately $635 million (about 900 billion won), with completion expected in the fourth quarter of this year. Bonchon Chicken, which is being sold by domestic private equity firm VIG Partners, is in final discussions with a foreign strategic investor.
Investors are focusing on restaurant franchises due to their stable cash generation capabilities. As the number of franchise locations increases, headquarters can secure steady revenue through royalties, raw material supply, and logistics. After acquisition, there is significant potential to enhance profitability through expanded digital ordering, improved logistics efficiency, and brand renewal.
Global expansion potential is also a key factor for investors. With the popularity of K-food, there is growing optimism about successfully establishing domestically validated brands in international markets. Mom's Touch has expanded into Thailand, Mongolia, and Japan, while Bonchon Chicken operates over 500 locations across 10 countries worldwide.
Successful transactions that improve operational efficiency post-acquisition serve as catalysts for investor sentiment. After private equity investment, Twosome Place strengthened its premium strategy and digital competitiveness, surpassing 1 trillion won in consumer sales for the first time last year. KFC Korea also completed a successful exit model after expanding its franchise operations and improving efficiency, being resold for around 200 billion won after three years.
However, there are rising concerns about the potential downsides and risks associated with increased capital inflow. Due to the structural characteristics of private equity firms, there is pressure to generate high returns and recoup investments within a certain timeframe. This can lead to excessive cost-cutting measures that undermine brand identity. If the burden of raw material supply costs, logistics fees, and advertising expenses is passed on to franchisees, it could lead to serious conflicts between headquarters and franchise owners. Employment instability arising from significant reductions in company-owned stores and organizational streamlining is also a major challenge.
A franchise industry insider noted, "In the past, the number of stores determined corporate value, but now profitability per store, global expansion potential, and digital competitiveness are more important evaluation criteria. For the time being, M&A activity in the restaurant franchise sector is likely to continue, focusing on brands that have proven their competitiveness."
* This article has been translated by AI.
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