Five Guys sale in Korea faces uphill battle

A Five Guys restaurant in Seoul, July 20 / Newsis

Five Guys, an American premium burger chain, is up for sale in Korea just two years after its splashy debut — a surprising move given its reputation as one of the country’s premium burger brands, and the fact that it turned profitable last year.

Despite those strengths, market watchers say Hanwha Group’s plan to divest the franchise is unlikely to go smoothly. They point to structural hurdles in Korea’s burger market that have hampered Five Guys’ stronger growth and could complicate efforts to attract a buyer.

Although the chain enjoyed strong popularity when it opened in 2023, that early enthusiasm has proved short-lived. Unlike casual burger brands such as McDonald’s, Lotteria and Mom’s Touch — which continue to post steady growth thanks to lower prices and wide accessibility — Five Guys has struggled to maintain momentum amid rising food and dining costs.

“Consumers see price as a psychological barrier,” a senior official from a major casual burger franchise said on condition of anonymity. “Premium burgers often fail to overcome that hurdle, which is why repeat consumption stays low.”

High operational costs further limit Five Guys’ ability to expand its restaurant network, making the brand less visible compared with casual fast-food rivals.

“Consumers do not usually choose between McDonald’s and Five Guys. They choose among casual brands, because premium chains have so few outlets,” another fast-food industry official said.

The challenges are also being seen as a reality check for Kim Dong-seon, vice president of Hanwha Galleria and the third son of Hanwha Group Chairman Kim Seung-youn. Kim spearheaded the launch of Five Guys in 2023 in what was billed as his first major business venture.

Industry insiders speculate that the project was rolled out too quickly, in what seemed to be a bid to become a market pioneer rather than a carefully strategized entry, and that sustaining the brand has proved more difficult than anticipated.

“I think Five Guys is up for sale because of its high operational costs,” the burger franchise official said. “Kim says he is selling it because the brand has performed remarkably, but I believe he has realized the challenges of sustaining operations. That also makes it difficult for the company to hire celebrity models, who could otherwise bring in a large volume of fandom-driven consumers.”

Hanwha Galleria Vice President Kim Dong-seon speaks during a ceremony marking the first anniversary of Five Guys' opening in Korea at a Five Guys restaurant in Seoul's Seocho District, June 26, 2024. Newsis

Hanwha Galleria, the retail subsidiary of Hanwha Group that operates Five Guys Korea, insists the sale is part of a broader portfolio realignment. The company said it plans to use the divestment to diversify its business and enhance the competitiveness of its shopping mall operations, including redevelopment of Galleria Luxury Hall in Seoul’s Gangnam District. It also stressed that all seven Five Guys locations in Seoul and Gyeonggi Province ranked among the top 10 in sales out of the brand’s 1,900 restaurants worldwide.

Last year, FG Korea posted sales of 46.5 billion won ($34 million) and an operating profit of 3.4 billion won, turning profitable after a loss the previous year. The company last month appointed a lead manager and distributed a teaser letter to private equity firms to invite investment.