As the burger franchise industry benefits from the "lunchflation" mood—a portmanteau of lunch prices and inflation—and posts strong results, mergers and acquisitions (M&A) are moving into full swing. Major brands are sustaining double-digit growth in both sales and operating profit, which is boosting their investment appeal, according to assessments.
On the 5th, according to the Financial Supervisory Service's electronic disclosure system, McDonald's Korea posted sales of 1.431 trillion won and operating profit of 73.2 billion won last year, up 14.5% and 523%, respectively, from a year earlier. Lotteria operator Lotte GRS also saw sales of 1.1189 trillion won and operating profit of 51.1 billion won, up 12.4% and 30.4%, respectively. Burger King operator BKR recorded sales of 892.2 billion won and operating profit of 42.9 billion won, up 12.6% and 11.7%, respectively, from the previous year, while Mom's Touch logged sales of 479 billion won and operating profit of 89.7 billion won, up 14.6% and 22.2%, respectively. KFC Korea also posted sales of 378 billion won and operating profit of 24.7 billion won, up 29.3% and 50.6%, respectively.
All top five burger franchises by sales posted double-digit growth, indicating an overall improvement in industry conditions. With store expansion, higher franchisee sales, and better profitability occurring simultaneously, the sector is being reappraised as part of dining out with stable cash generation.
A burger franchise official said, "Recently, as lunchflation led people to cite burgers as an affordable meal, demand has increased, and collaborations with famous chefs, marketing that leverages each brand's characteristics, and various promotions have driven a boom across the industry."
On the back of these improved results, sales processes for major companies are also picking up speed. Mom's Touch (KL & Partners) and Five Guys (Hanwha Galleria) are pushing for sales, and KFC Korea, after improving performance, succeeded in reselling to Carlyle in about two years, creating a case of investment recovery. However, FG Korea, the Korean operator of Five Guys, is reportedly revisiting the sale price with Hanwha Galleria and preferred bidder H&Q Korea, delaying the sale.
Industry watchers say a classic private equity strategy of exiting when valuations rise has entered full swing. Burger franchises are cited as a preferred investment sector thanks to scalability based on franchising, relatively low equipment and labor cost burdens, and room to improve the revenue structure through expanded digital orders and delivery. In particular, same-store sales growth and the potential for store expansion serve as key investment metrics. An investment banking (IB) industry official explained, "The most important factors are whether sales are increasing on a same-store basis and whether more stores can be added," adding, "We look not only at top-line growth but also at whether existing stores are improving sales."
Whereas burger franchises were once viewed as a typical domestic-demand sector dependent on the local consumption cycle and store expansion, more recently the revenue structure improvements from delivery and app orders, along with overseas expansion potential riding the K-food boom, are emerging as new corporate value assessment factors.
In practice, Five Guys is seeking a package sale that bundles domestic operating rights with rights to the Japan business, and Mom's Touch has also entered the Japanese market to broaden its local business base. Going forward, the success or failure of burger franchise M&A will hinge not merely on adding more domestic stores, but on how convincingly companies can demonstrate overseas scalability and brand export potential.
Accordingly, outcomes are expected to diverge by asset. Brands with a high proportion of company-owned stores or limited additional growth capacity may see sales delayed, while brands that have secured improved performance and overseas scalability are seen as better positioned to attract investors.
An IB industry official said, "Korea's dining-out sector sees trends change quickly, and there are structural risks such as relationships with franchisees, making it a challenging area for private equity to manage," adding, "In the past, dining out was viewed as a domestically focused industry, and questions about long-term growth affected investment decisions, but recently, with the K-food boom, there are more cases of investing on the view of global expansion potential."