[비즈한국] Hanwha Galleria452260 is reportedly considering the sale of Five Guys. Five Guys is considered a project into which Kim Dong-seon, Vice President of Hanwha Galleria and the third son of Hanwha Group Chairman Kim Seung-yeon, poured significant affection from the planning stage. Vice President Kim has been building his presence within the group by launching Five Guys, but this sale rumor has placed his management capabilities in a position to be re-evaluated.
Why did sale rumors arise for the once-successful Five Guys?
According to industry sources, Hanwha Galleria is recently known to be reviewing options such as the sale of FG Korea. FG Korea is a subsidiary wholly owned by Hanwha Galleria that operates the American handmade burger brand 'Five Guys.' Currently, seven stores are in operation, with the 8th location, the Yongsan store, set to open on the 25th.
Five Guys boasted high popularity, with long queues forming every time a new store opened. Its performance remained decent until last year, its second year since the domestic launch. In 2024, FG Korea succeeded in turning a profit, recording 46.5 billion KRW in revenue and 3.4 billion KRW in operating profit.
However, as sale rumors surfaced less than a year after turning a profit, speculation arose in the industry that Five Guys' performance may have declined this year. Unlike the early days of the launch when long lines were constant, the number of visitors has recently decreased to the point where one can enter without waiting even during lunchtime. Kim Dae-jong, a professor of business administration at Sejong University, pointed out, "Due to the nature of the food service industry, which carries high fixed costs, if revenue does not meet a certain level, accumulated deficits can build up quickly, potentially burdening the financial stability of the parent company or the entire group."
Hanwha Galleria stated, "The atmosphere in the first half of this year shows performance similar to last year," adding, "While we are reviewing various measures with the global headquarters to enhance Five Guys' brand competitiveness, no direction has been decided."
Some have also pointed to the burden of fees. Observations suggested that the royalty (brand usage fee) paid to the U.S. headquarters is set high, limiting profitability. In fact, FG Korea spent a total of 4.26 billion KRW in payment fees last year, which amounts to 9.2% of its total revenue.
However, experts evaluate that Five Guys' fees are not particularly high compared to other overseas brands. Han Sang-ho, a professor of food service management at Yeongsan University, explained, "Overseas brand royalties are typically 6-7% of revenue. However, because additional advertising and marketing costs are borne outside of the royalty, the combined fee would be around 10-12% of revenue. Whether the 9% fee for Five Guys includes advertising costs is the key, but it is not an excessive level that would make maintaining the brand difficult."
There are also analyses that the financial burden of the parent company and the economic downturn in the food service sector have played a major role. Hanwha Galleria participated in FG Korea's capital increase, injecting 5 billion KRW last year and 2 billion KRW this year. They have been continuously injecting funds, including a 4-billion KRW short-term loan from Hanwha Galleria Timeworld this month. As Hanwha Galleria has been recording net losses for three consecutive years, these capital injections appear to have been a burden.
Seo Yong-gu, a professor of business administration at Sookmyung Women's University, evaluated, "If there was a judgment that the business would continue to grow in the long term, they would have chosen to operate it directly. The fact that this is not the case allows for a reasonable inference that it may have lost its future vision. Wouldn't the impact of the premium market gradually shrinking be significant?"
'Five Guys Effect': Re-evaluating Vice President Kim Dong-seon's Management Ability
As the rumor of a Five Guys sale arises, interest in the management capabilities of Hanwha Galleria Vice President Kim Dong-seon is also growing. Vice President Kim, the third son of Chairman Kim Seung-yeon, began his management training somewhat late after working as an equestrian athlete. Having been evaluated as lacking presence compared to his brothers, Hanwha Group Vice Chairman Kim Dong-kwan and Hanwha Life President Kim Dong-won, Vice President Kim began to attract attention by leading the domestic launch of Five Guys.
Vice President Kim has shown special affection for the domestic Five Guys business. He personally traveled to the U.S. several times, spearheading the entire process from initial planning to contract signing. He showed considerable pride in bringing Five Guys to Korea, even announcing the news of the domestic launch on his personal social media before the company's official announcement.
Positive evaluations of Vice President Kim's management skills also followed. It is known that the success of the Five Guys launch had a significant impact on his rapid promotion from executive director to vice president in just two and a half years.
However, with the emergence of the Five Guys sale rumor, Vice President Kim's management achievements are back on the chopping block. Criticism is being raised that despite his interest in new F&B businesses, the results are minimal. The food service brands previously introduced by Vice President Kim have closed down one after another. The robot udon brand 'Yudong' withdrew just one month after opening in May, and the robot pasta store also closed after one year of operation.
It is also pointed out that while he has been engrossed in the new food service business, the competitiveness of his core business, the department store, is weakening. Last year, all five Galleria department store branches, including the Apgujeong Luxury Hall, Gwanggyo, Timeworld, Jinju, and Center City, saw a decline in revenue. His market share in the department store industry is also continuing to shrink.
Vice President Kim is focusing on the premium ice cream business to find a new breakthrough. He launched the ice cream brand 'Benson' in May and is currently operating five stores including pop-up stores. Industry insiders believe that the pressure is high as Vice President Kim must successfully establish the new business to be firmly recognized for his management capabilities. A Hanwha Galleria official stated, "As it is a new brand, we plan to continue growing the business. We plan to increase the number of stores to 10 this year."
However, there is no small amount of skepticism about the growth potential of the premium ice cream market. Professor Seo Yong-gu predicted, "The current domestic consumer market is dominated by the 'value-for-money' trend. While there may be demand for premium products in some commercial districts like Apgujeong and Gangnam, it will not be easy to expand the business on a nationwide scale."