F&B Assets Pile Up, but Buyers Are Nowhere to Be Found: Triple Pressure from Profitability Erosion, Franchise Disputes and Reputational Risk

Franchise F&B Assets Flood the Market as FIs and SIs Spend Years Merely Weighing Acquisitions
Negative Perceptions Spread After Theborn Korea’s Owner Risk and Pizza Hut’s “Margin Franchise Fee” Dispute
Risk Management Becomes More Critical Than Cash Flow and Brand Power

Foodservice companies are coming to market one after another in the mergers and acquisitions market. The move appears to reflect efforts to sell quickly and prevent further erosion in corporate value amid persistent headwinds such as high inflation and an economic downturn. Yet market sentiment remains cold. Intensifying brand competition, market saturation and slowing profitability have converged, leaving sellers in a situation where assets remain difficult to sell despite their desire to exit.

Assets Flood the Market, but Most Deals Collapse Amid Investor Absence

According to the F&B industry on the 15th, around 10 major franchise F&B assets are currently on the market. Representative brands include Pizza Nara Chicken Gongju, Dessert39, Norang Tongdak, KFC, Pizza Hut and Myeongnyun Jinsa Galbi. In addition, fast-growing brands such as Knotted and London Bagel Museum have also recently been mentioned in the market as potential sale candidates. An investment banking official said, “Including small and midsized brands beyond those already known to the market, there are in fact hundreds of F&B assets up for sale.”

Yet market response remains cautious. The search for buyers for F&B brands has been sluggish for years. Pizza Nara Chicken Gongju, which came to market in 2022, has failed to find a buyer for three years after SG PE’s attempt to acquire it for about $134 million collapsed in September last year. Norang Tongdak’s largest shareholders, Q Capital Partners and Coston Asia, also selected Samjong KPMG as sell-side adviser late last year and formally launched a sale process to recover their investment, but they have yet to select a preferred bidder.

Even when buyers decide to pursue acquisitions, the funding process has become increasingly difficult, making deal closings harder. Forest Partners, which began pursuing the acquisition of Myeongnyun Jinsa Galbi in the second half of last year, is known to be struggling to attract limited partners after major institutional investors, including key mutual aid associations, stepped back during the fundraising process. Major private equity firms holding F&B assets are seeking suitable buyers with the aim of securing, on average, three to four times their initial investment value in capital gains.

Owner Risk, ESG Controversies and Franchise Disputes Expose the Limits of Foodservice

Industry observers point to the inherent limitations of domestic F&B brands. Most are domestic demand-based business-to-consumer models, leaving long-term growth potential constrained by factors such as population decline. In particular, amid mounting cost pressures, the strategy of increasing revenue simply by expanding store networks is no longer seen as attractive as before. F&B is a sector in which brand recognition and consumer loyalty have a sensitive impact on sales. Because consumers react immediately to even minor changes in price, service quality and customer service, maintaining operational stability through consistent brand management is far from easy.

Against this backdrop, the fallout from Theborn Korea’s “owner risk” appears to be spreading negative perceptions toward franchise F&B brands. Theborn Korea drew significant attention at the time of its stock market debut, but its share price plunged sharply afterward amid a series of controversies, including product quality issues, allegations over the use of industrial cooking equipment and false advertising. In particular, following the controversies surrounding Theborn Korea, the perception has spread that reputational risk in domestic B2C brand businesses is far more damaging than previously expected.

The dispute involving Pizza Hut, a first-generation franchise brand, further fueled negative perceptions toward F&B. Pizza Hut’s reputation has been damaged by last year’s heated dispute over “margin franchise fees,” referring to distribution margins added to goods supplied by franchisors to franchisees. Moreover, after Korean Pizza Hut franchisees won a lawsuit demanding the return of margin franchise fees collected by the franchisor without proper disclosure, franchisees at other brands have also been reviewing a series of similar lawsuits against franchisors. Litigation has now become visible at around 10 companies, including Lotte Super, Lotte Fresh, Kyochon Chicken, Puradak, BBQ, Goobne Chicken and Doodzim, as well as BHC, owned by MBK Partners, and A Twosome Place, owned by Carlyle Group.

The case of London Bagel Museum, which came under scrutiny after an employee died from overwork, also brought the ESG risks embedded in the F&B market to the surface. In July last year, a man in his 20s collapsed while working at the Incheon branch of London Bagel Museum, a brand that had achieved rapid growth. London Bagel’s management was preparing to sell the company to a private equity fund at the time. The deceased is known to have endured the operational confusion before and after the opening of the Incheon branch, a newly launched store opened shortly before London Bagel’s planned sale. In the F&B industry, worker deaths are highly sensitive issues that directly damage brand value and can have a fatal impact on the completion of acquisitions.

Sales volatility driven by trends is another factor weakening investment appeal. The foodservice market is an industry where trends change at increasingly rapid speed, and demand for recently popular dessert brands or specific menu items has sometimes plunged within just a few months. The outlook for franchise businesses is also far from bright. A securities industry official said, “If the F&B M&A market remains difficult, an acceleration in franchise closures will be inevitable,” adding, “With burdens such as deteriorating public perception and weakening profitability converging, sale processes are unlikely to gain much further momentum.”

Baemin’s Profitability Slowdown and a Foodservice Ecosystem Heading Toward Prolonged Stagnation

The situation is not much different for foodservice-based platforms. Market sentiment has cooled further amid speculation that Germany’s Delivery Hero, the operator of Baedal Minjok, is reviewing a sale of Baemin. DH previously acquired an 87% stake in Woowa Brothers, the operator of Baedal Minjok, for $4 billion in 2019. Afterward, delivery demand surged during the Covid-19 boom, enabling rapid growth and making Baemin a key earnings contributor for DH. Recently, however, the picture has changed. While top-line growth has continued, profits have retreated. Revenue rose from about $2.28 billion in 2023 to about $2.89 billion in 2024 and about $3.53 billion in 2025, but operating profit fell from about $468 million to about $429 million and then to about $397 million over the same period.

The business environment is also challenging. As self-employed business owners and small merchant groups continue to push back against delivery app commissions, a social dialogue body led by the government is also under way to discuss measures for coexistence in the delivery app sector. If demands for lower commissions and free-delivery competition continue simultaneously, delivery app operators will face greater difficulty defending profitability. For this reason, some interpret DH as attempting to sell Baemin before its corporate value falls further. Baemin still has domestic market dominance and cash-generating capacity, but as competition intensifies and regulatory pressure grows, it may become increasingly difficult to defend its valuation.

Still, whether a sale will actually be completed remains uncertain. A high price tag of around $5.35 billion is likely to burden potential buyers, while slowing growth in the delivery app market and mounting commission regulation pressure also represent obstacles. In particular, regulatory discussions over delivery app commissions are expected to determine Baemin’s future profitability. Late last year, Fair Trade Commission Chairman Joo Byung-ki said the delivery app commission issue would be handled through a separate special law, apart from the Online Platform Act. If that discussion gains momentum, profitability pressure on delivery app operators, including Baemin, is likely to intensify.

Ultimately, the domestic F&B industry has entered a phase in which platform dependence, consumption slowdown, franchise conflicts and public opinion risks are overlapping simultaneously. As the expansion of brands leads to greater social risks and the possibility of investment recovery becomes increasingly opaque, the foodservice M&A market is also likely to enter a prolonged downturn. In particular, within a market structure reorganized around delivery platforms, advertising and commission burdens have surged, while slowing consumption has sharply weakened the ability to pass on costs, rapidly impairing profitability across foodservice brands. With labor conditions, franchise fees and cost disclosure issues increasingly escalating into social flashpoints, assessments are emerging that the domestic F&B industry is entering a phase in which it is being reclassified as a high-risk sector where regulatory and reputational risk management capabilities determine corporate value.