South Korean Five Guys faces uncertainty as Hanwha Galleria considers selling its local operator, FG Korea. The possible exit comes less than two years after the brand’s Korean debut. Although the burger market is booming, questions remain about the long-term strategy behind the move.
Hanwha Galleria recently asked Samil PwC to circulate sale materials to private equity firms. This step fueled speculation about financial strain and royalty burdens. However, the company stressed that the decision is purely strategic. Moreover, Hanwha highlighted that Korean outlets lead the global network in average sales per store.
Since its launch, South Korean Five Guys has expanded to eight prime locations with another store planned. Several outlets rank among the top five worldwide. Yet, the once-long lines outside its stores have started to shrink. Therefore, growth momentum now faces challenges despite strong early performance.
The company explained that any sale would align with long-term goals. Proceeds could fund new initiatives and strengthen its retail portfolio. Hanwha emphasized that shareholders remain the main focus of this strategy. Consequently, the exit is presented as a forward-looking business move rather than a retreat.
Still, industry insiders believe skepticism about growth drives the decision. The burger market has grown more competitive, making premium brands vulnerable. In South Korea, McDonald’s and Mom’s Touch dominate with scale and steep discounts. As inflation rises, consumers chase value more than premium positioning.
In South Korea, Five Guys operates at the high end, with burgers priced near 15,000 won. These prices are about three times higher than rivals. Moreover, insiders noted that contract terms limit discount flexibility. Unlike McDonald’s, Five Guys cannot run aggressive coupon campaigns. Thus, price competition remains a significant hurdle.
Financial performance has not been poor, but costs weigh heavily. FG Korea generated 46.5 billion won in sales last year with 3.4 billion won profit. However, it paid about 9 percent of revenue in royalties. These payments amounted to 4.2 billion won, reducing overall returns.
Expanding the store network also presents challenges. Handmade burgers demand more labor and higher operating expenses than fast-food rivals. Consequently, scaling up quickly becomes difficult. Industry experts suggest that profitability will face pressure as the chain grows.
Estimates value the brand’s local operation at up to 100 billion won. Yet, if popularity continues to slide, that valuation could decline. Analysts warn that while South Korea’s Five Guys turned a profit, extracting more growth will be tough. Therefore, investors remain cautious about the brand’s future direction.
