VIG buys global Korean fried chicken franchise

The private equity firm will become the master franchisor for a business that has grown in tandem with international interest in Korean cuisine. Bonchon's first restaurant opened in Busan in 2002 but the domestic presence is limited. The company established itself in the US in 2006 and that market has been the launchpad for a global franchise. An average of 60 stores per annum have opened over the past three years.

While the US remains an important jurisdiction with 85 restaurants, Southeast Asia is Bonchon's largest market by store numbers. There are 111 locations in the Philippines, 33 in Thailand, four in Singapore, and 13 in Cambodia, according to the company's website. It also has a presence in Bahrain and Kuwait.

Most of Bonchon's revenue comprises royalties from franchisees and the sale of its proprietary fried chicken sauces. Revenue for the US alone is on track to reach $210 million in 2018, up from $90 million in 2015. EBITDA is expected to triple over the same period, reaching $9.8 million.

Franchisees in the US pay a one-off fee of $40,000 and then annual royalties of 3.5-4.75% of gross revenue over a 10-year contract. They receive four weeks of training at Bonchon's flagship US store, the rights to use company signage and logos, site and layout assistance and approval, and cooking and operations manuals.

"Bonchon is a unique company which first introduced Korean fried chicken to the US mass market and successfully established its brand presence in Asia, including the Philippines, Thailand, and Singapore. Like K-Fashion and K-Beauty, we believe K-Food will continue to gain interest globally," Byung Moo Park, a managing partner at VIG, said in a statement. The GP will support growth through initiatives including the appointment of a new global CEO and other senior executives.

The deal, which is expected to close in late December, will be the seventh investment from VIG's third fund. Earlier this week, the firm announced that one of its portfolio companies, HiParking, would acquire Wilson Parking Korea as part of an industry consolidation play.

Korea's domestic fried chicken restaurant segment has also attracted private equity interest. Three weeks ago, The Rohatyn Group (TRG) agreed to exit BHC Group through a founder buyback. BHC is one of five companies that together have a more than 50% share of Korea's fried chicken quick service restaurant (QSR) market. The segment was worth KRW3.5 trillion ($3.1 billion) in 2016, while the overall QSR industry generated revenues of KRW13.1 trillion.

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• Topics
• North Asia
• Buyouts
• Consumer
• South Korea
• VIG Partners