Gopizza, a domestic pizza franchise that has focused on expanding its footprint, is now being tested on proving profitability. It achieved quantitative growth with 1,200 stores worldwide, but critics say its financial substance falls short.
Costs incurred in the overseas expansion led to accumulated deficits in the tens of billions of won, and the asset value of key overseas subsidiaries also plunged. Whether it can generate actual profit is expected to be the watershed that determines future corporate value.
According to the startup sector on Feb. 10, Gopizza, which has an initial public offering (IPO) in mind, recognized impairment losses totaling 12.1 billion won as of the end of 2024 for overseas subsidiaries in Singapore, India, and Indonesia, at 7.8 billion won, 3.1 billion won, and 1.1 billion won, respectively.
In accounting, an "impairment loss" means writing it off as an expense when the future value of an invested asset has fallen significantly and is deemed unrecoverable.
In particular, the Singapore subsidiary saw 93% of its asset value evaporate. It effectively means the local operation is unlikely to recover even the principal. Experts said the aggressive global expansion boomeranged into deteriorating profitability.
◇ "system sales" illusion… the real report card is "20 billion won operating loss"
Gopizza was founded in 2017 by Chief Executive Lim Jae-won with the concept of being able to eat pizza cheaply alone. After establishing itself in the domestic market, it expanded overseas starting with India in 2019, followed by Singapore, Hong Kong, Indonesia, and Thailand. Last year, it opened its first store in Kuala Lumpur, Malaysia. The number of stores at home and abroad stands at 1,200.
Gopizza said it emphasizes growth, saying "system sales," the total sales of headquarters and franchisees, reached 50 billion won.
But accounting experts say this is not an appropriate metric to show the solidity of corporations. As of the end of 2024, 80% (960) of the 1,200 stores are franchisees, and only 20% are company-owned.
The sales recorded in the audit report that actually flow into the corporations' coffers (as of 2024) amount to only 19.9 billion won. That figure does not even reach half of system sales.
The bigger problem is profitability. Operating losses accumulated over the four years from 2021 to 2024 alone amount to about 20 billion won. The net loss, which was around 7 billion won in 2021, instead swelled like a snowball to 11.2 billion won in 2024.
The retained deficit (accumulated loss) came to 36.6 billion won, as the money lost far exceeded what was earned so far.
◇ 60 billion won funding… task is proving profitability for VC exits
Gopizza said, "Recently, the Korea and India subsidiaries recorded a profit on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis." But this metric also needs to be assessed coolly.
Gopizza, which presents itself as a Foodtech corporations, requires investment in expensive automated ovens and equipment. Therefore, relying only on EBITDA, which does not reflect equipment depreciation and interest expense, makes it hard to fully explain the company's actual cash generation capacity. Industry consensus is that after deducting all kinds of expenses, it still cannot escape a loss-making structure.
Gopizza has attracted about 60 billion won in investment from GS Ventures, CJ Investment, and Thailand's CP Group. That is because it is classified as a Foodtech corporations rather than a simple pizza shop.
However, Gopizza's current form is close to a typical franchise. Franchisees account for 80%, and sales of materials and supplies such as dough and sauce supplied to them are the main revenue source.
The venture investment sector typically expects an exit (recovery of invested funds) within five to seven years after investment. That is why there are calls that this year requires proof of tangible performance for Gopizza's investment recovery. The accumulated losses and the decline in overseas business value are financial burdens Gopizza must overcome to defend its corporate value.
An industry official said, "Now the key issue is not expansion but when returns can be generated from the capital invested," adding, "Given the size of the accumulated losses, in a future IPO or mergers and acquisitions (M&A) phase, whether profitability has been verified will be the key variable determining corporate value."
In response, Chief Executive Lim Jae-won of Gopizza said, "As of the end of last year, sales from company-owned stores increased to 50%, shifting toward profitability," adding, "If you add the sales of domestic and overseas subsidiaries in 2024 and last year, it exceeds 30 billion won."
Lim added, "Sales from franchisees are around 20%, and the remaining 30% of sales come from partnerships with large corporations and solution sales."