South Korea’s Hanwha Group is seeking to sell the Korean operations of US premium burger chain Five Guys, two years after the brand’s high-profile local debut led by group scion Kim Dong-seon.
The group has tapped Samil PwC to manage the sale and recently sent teaser letters to private equity firms with experience in food and beverage franchises, according to people familiar with the matter.
Five Guys entered the Korean market in June 2023 under the stewardship of Kim, the third and youngest son of Hanwha Chairman Kim Seung-youn and an executive vice president at Hanwha Galleria. Kim Dong-seon spearheaded the deal from planning to execution, marking his first major entrepreneurial venture within the conglomerate.
The burger chain’s debut in Seoul’s upscale Gangnam district was positioned as a flagship for Hanwha’s consumer business, but the conglomerate now appears to be stepping back from the business just as it reaches operational maturity.
Kim Dong-seon, the third and youngest son of Hanwha Group Chairman Kim Seung-youn, speaks at the launch of Five Guys Korea in June 2023 (Courtesy of FG Korea) FG Korea, a wholly owned subsidiary of Hanwha Galleria established to run the franchise, currently operates seven stores, including in Seoul Station, Apgujeong and Pangyo, with an eighth set to open in Yongsan next week. It is also looking to enter Japan.
OPERATIONS TOUGH
FG Korea posted 1 billion won ($720,000) in revenue and 1.3 billion won in operating loss in its first year.
However, Five Guys Korea has since shaped up more favorably. Last year, it posted 46.5 billion won in sales and 3.4 billion won in operating profit.
The teaser sent to potential buyers forecasts 70 billion won in revenue for this year, sources said.
Kim Dong-seon (center), the third and youngest son of Hanwha Group Chairman Kim Seung-youn, poses with company official at the 1st anniversay of Five Guys Korea in June 2024 (Courtesy of FG Korea) Still, the business has required ongoing capital infusions from its parent and affiliates.
Hanwha Galleria injected 5 billion won and 2 billion won through rights issues in December and May, respectively.
Earlier this week, FG Korea borrowed 4 billion won from affiliate Hanwha Galleria Timeworld to fund store expansion and operations.
EXIT BEFORE MARKET SATURATION SETS IN
Founded in Virginia in 1986, Five Guys is one of the US’ top three gourmet burger brands, operating an estimated 1,800 outlets in more than 20 countries, including the UK, France and Germany. Korea is the franchise’s sixth Asian market after Hong Kong, Singapore, China, Malaysia and Macau.
Hanwha’s prospective exit from the business comes amid questions over the long-term growth of Korea’s once-booming premium burger market.
US premium burger chain Five Guys' outlet near Seoul Station (Courtesy of FG Korea) Sources said Hanwha hopes to exit before market saturation sets in.
In the early 2020s, premium burger chains mushroomed in Seoul, including Shake Shack, Super Duper, Gordon Ramsay Burger and In-N-Out. Recently, however, such imported burger franchises are rapidly shrinking.
While cost-effective burgers are gaining attention, individually crafted burger shops are losing competitiveness, industry watchers said.
Industry data showed major premium franchise burgers such as Shake Shack, Gordon Ramsay and Super Duper have all stopped growing.
Shake Shack's Korean subsidiary, The Big Bite, recorded 1.9 billion won in operating loss on sales of 106.5 billion won in 2024.
“The outlook for premium burgers has cooled, and a relative newcomer like Five Guys Korea still requires significant investment to scale,” said a Seoul-based investment banker.
Kim Dong-seon, Hanwha Group Chairman Kim Seung-youn's third and youngest son KIM DONG-SEON’S OTHER MOVES
Hanwha Galleria also has limited financial headroom.
Last year, the company posted 540 billion won in revenue and 3.1 billion won in operating profit on a consolidated basis. It remained in red in the first quarter of this year after posting 18.8 billion won in net loss last year.
Analysts say the sale likely signals a broader strategic business readjustment.
Rather than expanding with costly global brands that require high royalty payments, Hanwha may shift to developing in-house brands.
It also allows Kim Dong-seon to focus on other larger-scale deals, following Hanwha Hotels & Resorts’ 870 billion won acquisition of food service company Ourhome Ltd. in May – a deal also led by the 36-year-old executive.
“Kim seems especially eager to build his own legacy within Hanwha’s M&A playbook, perhaps driven by sibling rivalry,” said an industry source familiar with the group’s succession dynamics. “Selling Five Guys may be less about retreat and more about redirecting capital to something bigger.”
Write to In-Soo Nam at isnam@hankyung.com Jennifer Nicholson-Breen edited this article.
