The previous Korean website for Popeyes. Screen captured from Popeyes website
By Park Jae-hyuk
The recently announced return of Popeyes to the Korean market has prompted investors to anticipate KL&Partners’ (KL&P) earlier-than-expected divestment from Mom’s Touch, which specializes in chicken sandwiches and fried chicken, just as the U.S. fast food franchise also does.
At this moment, Daewoo Development is in talks with the brand owner of Popeyes, Restaurant Brands International (RBI), to become the domestic operator of the franchise. Popeyes exited the country months ago, in light of the termination of contract between the Canadian-American company and its former Korean operator, TS Food & System, an affiliate of TS Corp.
The Korean construction company also started hiring experienced workers for various positions this month to manage Popeyes restaurants here, with the aim of reopening the stores by the end of this year.
Mom’s Touch CEO Kim Dong-jeon / Courtesy of Mom’s Touch
Such attempts can be seen as threats to Mom’s Touch, which has recently been losing its popularity among consumers, who have in particular been complaining about its deteriorating product quality, since KL&P’s acquisition of the franchise in November 2019 from its previous owner, Chung Hyun-sik.
Mom’s Touch was initially founded by TS, the previous Korean operator of Popeyes.
Chung, who was once a TS executive, left the company and took over the franchise, eventually leading Mom’s Touch to outperform Popeyes, leading to Popeyes closing all of its restaurants in Korea.
If Popeyes regains its popularity among Korean consumers after its return, KL&P will face more pressure to sell Mom’s Touch before any decrease in its valuation.
The local private equity firm (PEF) has already been rumored to be seeking an earlier exit, since it increased its stake in Mom’s Touch to 67.5 percent from 59.8 percent in May, through a securities-backed lending process. The increase in the largest shareholder’s stake reduces the amount of outstanding shares, and enables an easier stock price hike for a successful exit.
Although the company has denied any speculation, the stock price of Mom’s Touch has jumped sharply in the past whenever rumors of its sale spread on the market.
Some investors also mention KL&P’s previous sale of Gayasan Mineral Water to Dong-A Socio Holdings in 2018, only two years after its takeover. Most other PEFs in Korea tend to sell their portfolio companies at least five years after their acquisitions.
In addition, Mom’s Touch is in conflict with one of its franchisees in Seoul, which claims that the franchiser unilaterally terminated a franchise agreement with it, due to the latter’s attempt to organize an association of Mom’s Touch franchisees. The franchiser has denied the claim, arguing that the termination of the agreement was legitimate.
Observers regard the dispute as another unfavorable factor for the company’s valuation, which could make it difficult for the largest shareholder to pursue a successful divestment.Internet Explorer Channel Network