Hanwha contemplates the prospect of selling its stake in the Korean branch of popular burger chain Five Guys.
In a significant development for the South Korean retail sector, Hanwha Galleria, a subsidiary of the Hanwha Group, is reportedly exploring the sale of FG Korea, the company that operates the popular American burger chain Five Guys in South Korea.
Five Guys entered the Korean market in June 2023, with its first store opening in Seoul's Gangnam district. Since then, the chain has expanded to seven locations across South Korea, with an eighth store scheduled to open at IPark Mall in Yongsan, central Seoul. The company had also planned significant expansion into Japan, aiming to open over 20 stores within seven years after signing a memorandum of understanding with Five Guys International.
To facilitate the potential sale, FG Korea has appointed Samil PwC as its lead advisor and has distributed teaser letters to private equity firms, indicating a likely 100% stake sale. This move is part of Hanwha Galleria's broader strategy to streamline its portfolio and address market challenges.
In the last fiscal year, FG Korea reported sales of 46.5 billion won (approximately $33.4 million USD) and a net income of 2 billion won. Another report mentions an operating profit of 3.4 billion won, highlighting a successful turnaround to profitability. However, the specific valuation of FG Korea for the sale has not been disclosed, but it is likely to attract interest from private equity firms.
The decision to sell reflects broader challenges in the food service sector and the need for Hanwha Galleria to reassess its consumer-facing portfolio. The volatile market conditions and underperforming core businesses, including Hanwha Hotels & Resorts, have driven this strategic pivot.
If a deal materializes, it could reshape the future expansion plans for Five Guys in South Korea and potentially affect its entry into Japan, depending on the strategic priorities of any new ownership. It is worth noting that contractual obligations with the franchisor may limit Hanwha Galleria's unilateral decision-making regarding the sale of FG Korea.
Further developments concerning FG Korea will be disclosed within a month. Hanwha Galleria, in consultation with Five Guys' global headquarters, is also reportedly exploring strategies to strengthen the brand's competitive edge. The company has a memorandum of understanding with Five Guys International to lead the brand's expansion into Japan.
The introduction of Five Guys into the Korean market was led by Hanwha Galleria Vice President Kim Dong-seon. As of now, there are seven Five Guys stores in South Korea, with an eighth set to open at IPark Mall in Yongsan, central Seoul. No definitive decisions have been made regarding the future of FG Korea, and no deal terms or valuation have been finalized as of yet.
Private equity firms may be attracted to invest in FG Korea, given its profitable performance and the expanding business in the South Korean market. The potential sale of FG Korea could impact the future expansion plans of Five Guys, particularly in Japan, as any new ownership may have different strategic priorities.
