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Franchise M&A Market Piling Up For Sales…Finding a new owner 'difficult'

Restaurant brands, mainly hamburgers, are coming up for sale in the M&A market, but they are failing to find a new owner. McDonald's Korea, Burger King, Mom's Touch, and other brands in the market are selling, but the market's response is cold.


Some analysts say that the obstacle is that while the sales of restaurant brands continue to increase, profitability is falling.


According to the industry on the 16th, hamburger companies such as McDonald's Korea, Burger King, Mom's Touch, and KFC have been put up for sale over the past year, and only KFC has completed the process.


KG Group sold KFC Korea to Orchestra Private Equity (Orchestra PE). KFC, which has found a new owner, will expand its market influence by entering the franchise business in the domestic market. KFC has operated mainly directly in the domestic market and has had fewer stores than its competitors.



On the other hand, news from the rest of the brands is still available. McDonald's Korea had an M&A negotiation with Dongwon Group earlier this year, but it broke down as it failed to narrow its differences, including the sale price. Dongwon Group participated in the preliminary bid for the sale of McDonald's Korea alone and carried out due diligence, but eventually gave up. McDonald's Korea is still looking for a strategic partnership, but it is unclear whether it will be successful.


Mom's Touch is also still drifting without finding a new owner. KL & Partners, the largest shareholder, is in various discussions to sell Mom's Touch, but nothing has been decided yet. Burger King withdrew its sale after failing to find a new owner. Downtowner, which has emerged as GFFG's "good son brand" due to its popularity around the MZ generation, has also appeared in the M&A market, but the response is cold.


Restaurant brands are showing growth in sales as demand for delivery increases in the era of COVID-19, but they are still showing problems in profitability. This is why there are voices saying that it is burdensome to acquire less profitable brands.


McDonald's Korea's sales rose 14.6% year-on-year to 995 billion won last year. However, operating loss was 27.8 billion won, similar to the previous year. BKR, which operates Burger King, also posted sales of 757.4 billion won, up 11.6% from the previous year, but operating profit fell 68.4% to 7.9 billion won.


In addition, there is still a perception that negotiations with the headquarters are difficult for brands with global headquarters. In this situation, some point out that negotiations themselves are difficult as restaurant brands still insist on high selling prices.


"There are many brands that record operating losses or show a decline in operating profit, but the price of the hoped sale is high," an industry official said. "If we don't lower the previously thought sale price, there will be no M&A in the restaurant industry for the time being."

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