이 기사는 2020년 05월 20일 08시00분 thebell에 표출된 기사입니다

Burger King Korea has showed strong improvement in financial performance over the last year, with double-digit growth of both revenue and operating income signaling that the fast-food chain is on the upward sloping part of the J-curve.

BKR Corp, which operates Affinity Equity Partners-owned Burger King Korea, recorded revenue of 502.8 billion won ($409.8 million) for 2019, up about 25 percent year-on-year, according to its latest audited financial statements. Operating income almost doubled from the previous year to reach 18.1 billion won. As a result, the company’s operating income margin increased to 3.6 percent from 2.2 percent in the prior year.

BKR’s earnings before interest, tax, depreciation and amortization (EBITDA) also rose partly due to the impact of the adoption of IFRS 16, which requires lease obligations to be brought on balance sheet. The company saw its depreciation costs increase to 44.9 billion won in 2019 from the previous year’s 12.9 billion won.

Right after being acquired by Affinity Equity Partners in 2016, Burger King Korea was hit hard by a series of difficulties such as the overall slowdown in the restaurant industry and occurrence of hemolytic uremic syndrome (HUS), widely known as "hamburger disease” here, contracted by a girl after eating an undercooked McDonald's hamburger.

In the first year of the acquisition, BKR’s operating income declined by 11 percent year-on-year to 10.7 billion won. The figure deteriorated further to shrink to 1.4 billion won in the following year.

But Affinity Equity Partners’ continued effort to increase the value of Burger King Korea seems to be paying off as the firm enters its fifth year after the acquisition of the fast-food chain.

To grow the company, Affinity Equity Partners has focused on three strategies: store restructuring, marketing and menu development.

The number of Burger King stores in Korea has increased to 391 currently from 266 in 2016. New stores customized for specific neighborhoods were opened, while at the same time those recording losses were closed. This led to Burger King Korea reporting positive same-store sales growth.

Its marketing focus has shifted from high-end burger to cheaper menus, which helped boost sales and its brand power. Burger King Korea has strengthened delivery services, while opening more drive-through stores. It also has introduced kiosk and mobile app ordering services as well for customer convenience.

Its continued effort to develop new menus is also one of the factors that contributed to attracting more customers, the private equity firm said.

With Burger King Korea posting strong improvement in its financial performance for the last two consecutive years, Affinity Equity Partners is expected to start a process to sell the company as early as the second half of this year. Expansion of delivery services has helped the fast-food chain partly offset the negative impact from the COVID-19 outbreak, the private equity firm said.

In 2019 Affinity Equity Partners bought a 100 percent stake in Burger King Japan Holdings. The move is seen as part of a strategy by the firm to further increase the value of the business.

But some market observers are raising questions over whether growth of Burger King Korea is sustainable. This, combined with skepticism toward the outlook for the food and beverage (F&B) industry, could negatively affect the valuation of Burger King Korea.

Among the latest deals in the country’s F&B sector are KL&Partners’ acquisition of Haimarrow Food Service, the operator of the country’s famous fast-food chain Mom’s Touch, and Unison Capital’s sale of Gong Cha Korea. Both F&B companies were sold at a price equivalent to a multiple of about 10 times EBITDA for their latest fiscal year. Considering this valuation multiple, Burger King Korea’s enterprise value could be larger than 650 billion won.

(Reporting by Hye-ran Kim)