Theborn Korea is facing a hurdle ahead of its plan to go public as some franchisee owners of the company’s “tonkatsu” (breaded, deep-fried pork cutlet) takeout brand staged a protest, demanding the company take responsibility for their disappointing sales, according to company and industry officials, Tuesday.
Eight franchisees of Yeondon Ball Katsu staged a protest in front of Theborn Korea’s office in southern Seoul the same day. Members of the Korea Franchise Union joined the protest.
They said that their stores’ sales have never reached the figures promised by the company CEO Paik Jong-won before they opened the stores, and accused him of making false claims. The protesters then filed their suit to the Fair Trade Commission (FTC).
The franchisee owners said that while the star restaurateur and franchise business expert had promised them that they would see monthly sales of at least 30 million ($22,000), the figures they saw were around half that. The sales-to-operating profit rate Paik had promised was 20 to 25 percent but it turned out to be 7 to 8 percent, they added.
They also said that while Paik had explained Yeondon Ball Katsu’s rate of costs under Theborn Korea would be 36 to 40 percent, the rate actually turned out to be over 45 percent. They added that after paying rent, maintenance bills and fees for food delivery service, they were left with barely any profit.
According to the FTC, Yeondon Ball Katsu in 2022 registered annual sales of 260 million won per store on average and 157 million won the following year. Taking into account the figures stated by the franchisees, their monthly profit is closer to 1 million won.
Experts said that the complaint lodged by the franchisees to the FTC could negatively affect Theborn Korea’s initial public offering (IPO) process. The food and beverage franchise company launched its listing process last month aiming to go public on the Kosdaq market during the second half of this year. This is the company’s second attempt to go public after its previous attempt failed in 2018.
“According to related regulations in the country, if a company has a legal suit filed against it or even noisy issues stirring the public, it’s possible 카지노 that an assessment for its IPO qualification can be delayed for a certain duration,” a securities analyst at Mirae Asset Securities said.
Another expert from the Korea Exchange said that a public movement calling for antitrust intervention “can never be a good sign” for a company preparing its IPO.
On Monday, Theborn Korea released a statement through Barun Law, its legal representative, refuting the franchisees’ claims as untrue.
The company said that it suggested to the franchisees a predictive monthly sales of 17 million won in 2022, not 30 million won. Yeondon Ball Katsu stores’ average monthly sales for the same year were over 21 million won, it added.
The company also denied the argument put forward by the franchisees that it had rejected their requests to lower the costs of its supplies to the stores and raise prices for their food products. It said that it lowered the supply costs by 15 to 25 percent from 2022 to 2023.
“Some Yeondon Ball Katsu franchisees have quit their businesses not because of disappointing sales but because of other market conditions such as rising market prices and some franchisees shifting to different brands under Theborn Korea,” the statement said. The number of the brand stores has reduced to less than 30 from over 80 during 2021-23.
“We’ve always tried to settle our differences in opinion through our arbitration committee but it was the franchisees who always refused to discuss things at the table,” it added.