Exclusive
"Non-compete Clause" Chicken Franchise BHC in Another Dispute with Former Chairman Park Hyun-jong

[비즈한국] BHC Group, the top chicken franchise company, recently had its injunction request for a non-compete clause against former Chairman Park Hyun-jong dismissed, as confirmed by BizHankook's investigation. BHC Group dismissed former Chairman Park from his executive roles in its affiliates last November, and filed for the non-compete injunction in April this year based on his executive appointment contract after reports surfaced that he intended to acquire MFG Korea, the operator of the restaurant chain "Mad for Garlic."

The 50th Civil Division of the Seoul Central District Court (Presiding Judge Kim Sang-hwan) dismissed the non-compete injunction request filed by BHC and Global Gourmet Services (GGS) against former BHC Chairman Park Hyun-jong on July 31. Previously, the two companies filed for the injunction with the court based on their executive appointment contract after media reports emerged that former Chairman Park, who was dismissed in April, would acquire MFG Korea, the operator of Mad for Garlic. The intent was to prevent Chairman Park from directly or indirectly participating in the acquisition of MFG Korea shares or working for the company until November 2026.

BHC is South Korea's number one chicken franchise company. Last year, its separate revenue reached 535.6 billion KRW, marking the industry's top spot for two consecutive years. Its operating profit was 120.3 billion KRW, with an operating profit margin (22%) that overwhelmed the industry's second-place Genesis BBQ (12%) and third-place Kyochon F&B 339770 (6%). In November 2021, it acquired the restaurant operator Outback Steakhouse Korea, transforming into a comprehensive dining company with five subsidiaries, including Super Duper Korea (operator of Super Duper), BigTwo (Gram Gram), Bogang Enterprise (Keunmam Halmae Sundaeguk), and Buja Doeseyo (Changgo 43). Last month, it changed its company name to "Dining Brands Group."

GGS is the holding company that owns 100% of BHC shares. BHC was originally acquired by Genesis BBQ in 2004 but was sold again to the American private equity firm The Rohatyn Group in 2013. Former Chairman Park Hyun-jong, a former Samsung Electronics employee, joined Genesis BBQ in May 2012 and served as the head of the global business division before moving to BHC as CEO in June of the following year, immediately after its sale. Later, in 2018, he established a special purpose company, Global Restaurant Group (now GGS), with Elevation Equity Partners and MBK Partners to acquire BHC. Currently, the largest shareholder of GGS is MBK Partners, and former Chairman Park is known to hold approximately 9% of the shares.

The dispute began with the dismissal of former BHC Chairman Park Hyun-jong. GGS and BHC dismissed former Chairman Park from his roles as CEO and inside director, respectively, last November. According to industry insiders, the background for the dismissal was the shareholders' distrust regarding former Chairman Park's personal legal risks and the implementation of board resolutions. Previously, former Chairman Park was indicted without detention in November 2021 on charges of accessing the internal network of Genesis BBQ twice using the IDs and passwords of former and current employees at the BHC headquarters in Songpa-gu, Seoul. Subsequently, he was sentenced to 6 months in prison suspended for 2 years in both the first trial in June 2022 and the second trial in August this year.

The basis for this non-compete injunction request is the executive appointment contract BHC Group signed with former Chairman Park Hyun-jong. When former Chairman Park signed a director appointment contract with BHC in January 2019 and a CEO appointment contract with Global Restaurant Group (now GGS) in January 2021, he included a non-compete clause in the contracts. According to the contract, for 36 months from the date of his retirement from the company, he cannot: △engage in a business that competes with the company or its affiliates in South Korea without the company's prior written consent, or △work as a major shareholder, executive, employee, advisor, consultant, or agent for a company engaging in similar businesses.

The background to the non-compete injunction lies in recent news regarding the sale of MFG Korea. MFG Korea is the company that operates family restaurants such as Mad for Garlic and TGI Fridays. According to industry reports, Affirmia Capital, the largest shareholder of MFG Korea, used its tag-along rights in September to sell its entire stake in MFG Korea to Immanuel Corporation. Immanuel Corporation is a company established in July, and Yoon Da-ye, a former executive at BHC Group, serves as its CEO. Some media outlets speculated that former CEO Park is acquiring MFG Korea through his close associate, former executive Yoon.

The court dismissed the injunction request, stating that there was no confirmation of former Chairman Park Hyun-jong's actual acquisition or intention to acquire shares of MFG Korea. The court judged, "Based only on the plaintiffs' claims and submitted materials, it is difficult to see that the necessity for a preservative measure as requested in the application has been sufficiently substantiated," adding, "The evidence submitted to support the violation of the non-compete agreement consists mostly of speculative articles. The content of these newspaper articles alone cannot be considered proof that the debtor has acquired shares in MFG Korea."

BHC and GGS have filed an immediate appeal against the dismissal and are awaiting the results of the appellate court. A representative for BHC (Dining Brands Group) stated, "We signed an appointment contract that included a non-compete clause in the past, and as related reports continued, we inevitably filed for an injunction."

BizHankook contacted the legal representative for former BHC Chairman Park Hyun-jong to hear their side, but was unable to receive a response.