Food and beverage franchises strive to overcome IPO scepticism in market

Major food and beverage franchises in Korea are considering going public again this year, despite concerns from market watchers due to economic challenges and a string of unsuccessful IPOs in the sector. One such franchise, Theborn Korea, led by culinary figure Paik Jong-won, postponed its IPO plans in 2018 due to the pandemic but is now revisiting the idea following a sales resurgence. In 2022, the company saw a 45 per cent increase in sales to 282.2 billion won ($212 million).

Hollys Coffee, a franchise under KG Hollys F&B, is setting its sights on an initial public offering (IPO) within the current year. In September, the franchise initially reached out to major securities firms to gauge their interest in potentially serving as underwriters for the IPO. However, this process was temporarily halted. Now, as of this month, Hollys Coffee has resumed its efforts to become the first coffee franchise to be listed on the Korean stock market.

Similarly, the Genesis BBQ Group, known for its BBQ Chicken brand, is anticipated to pursue an IPO within the same timeframe. This decision is bolstered by a consistent uptick in revenues and the expanding number of franchise outlets. Notably, in 2022, the group witnessed a significant revenue surge of 15.6 per cent compared to the previous year, amounting to 418.8 billion won. Moreover, the total number of Genesis BBQ Group outlets worldwide surpassed 2,000 during the same period.

Franchise businesses have encountered challenges in securing listings on the stock market, despite repeated efforts by various companies. Key obstacles include difficulties in domestic franchise expansion and earnings volatility.

Mom’s Touch, a chicken burger chain, voluntarily delisted from the junior Kosdaq exchange six years after its successful listing in 2015. Kyochon F&B, which went public in November 2020, has experienced a substantial decline in share price due to performance setbacks, now trading at approximately 7,000 won from an initial offering price of 12,300 won. Other domestic coffee franchises, like A Twosome Place and Ediya Coffee, have faced ongoing struggles in their attempts to go public.

Despite these challenges, recent endeavours by food companies to diversify beyond casual dining and expand into international markets have bolstered their competitiveness and corporate value. Stock market listings provide crucial investment capital for these firms to pursue overseas opportunities and diversify into new sectors.
Nevertheless, uncertainties in the food service industry amid economic downturns raise doubts about the viability of IPOs.