Hanwha Galleria’s potential sale of FG Korea, local operator of US burger chain Five Guys, has raised questions about its motives, coming less than two years after the brand’s Korean debut amid a booming burger market.
Just last month, the company engaged local accounting firm Samil PwC to circulate sale materials to private equity firms.
While market chatter has pointed to weakening profitability and a burdensome royalty structure, Hanwha Galleria insisted any decision is strategic, not financial.
It countered by noting that Korean outlets lead Five Guys’ 1,900-store global network in average sales per store, with several ranking among the brand’s top five worldwide. Since its June 2023 debut, the chain has steadily expanded to eight prime locations, with another in the pipeline — even as the once-lengthy queues outside its stores have dwindled.
Any sale, if pursued, would be part of a long-term growth strategy to fund new initiatives and bolster its retail portfolio for the benefit of shareholders, the company explained.
Industry insiders link the move to skepticism over its growth prospects in an increasingly cutthroat market — especially in the burger segment, where premium positioning is limited by its everyday image.
Dominating Korea’s burger market are players such as McDonald’s and Mom’s Touch, which are pursuing scale and steep discounts to capture price-conscious consumers in a high-inflation, low-growth economy.
Five Guys sits at the high end, with burgers priced around 15,000 won ($11), roughly three times the cost of those at other burger chains.
According to industry insiders, Five Guys, already lagging in price competition, has limited room to cut prices. “Under Five Guys’ contract structure, it’s difficult to run deep-discount promotions like McDonald’s coupon campaigns,” they said.
FG Korea posted 46.5 billion won in revenue last year, with operating profit of 3.4 billion won. About 9 percent of sales, roughly 4.2 billion won, was paid in royalties.
Expanding the store network poses another challenge for upscale burger chains like Five Guys, as growth brings higher operating costs, given that handmade burgers are labor-intensive and require more staff than typical fast-food outlets.
Industry estimates put the brand’s market value at up to 100 billion won, but that valuation could tumble if its popularity continues to wane. “Five Guys Korea has turned a profit, but in the current market, squeezing out further gains won’t be easy,” said one burger industry insider.
minmin@heraldcorp.com
