bhc 'Chicken Industry Leader' Sudden Dismissal Behind the Scenes

Sudden Executive Overhaul... Can't Be Explained by 'Image Damage' Alone
Ongoing Lawsuits with BBQ... 20 Legal Disputes Pose Risks
Internal Conflicts Surface... Appointment of MBK Partners CFO Seems a Catalyst
Focus on Sale After Strengthening Control... Is This a Move for an 'Exit'?

On the 6th, Park Hyun-jong, chairman of bhc, was suddenly dismissed from his position as CEO of Global Gourmet Services (GGS), the holding company of bhc, drawing attention to the background of this decision. Not only Chairman Park, who contributed to bhc's rise as the number one chicken franchise in the industry, but also CEO Lim Geum-ok, who worked closely with him, were replaced. The holding company explained that this personnel reshuffle was aimed at overcoming the deteriorating internal and external management environment, but considering that bhc had steadily expanded its scale under the two-CEO system, this move has been met with skepticism. Some speculate that Chairman Park’s repeated legal battles with competitor Genesis BBQ since his appointment damaged the company’s image, prompting a ‘scapegoating’ personnel move to prevent greater harm. There are also observations that MBK Partners, the largest domestic private equity fund owning about half of the shares in bhc’s holding company, exerted influence to replace the management and sell the company under favorable conditions.

The Shadow of the No.1 Chicken Industry: 'Litigation Risk'

According to industry sources on the 7th, GGS held a board meeting the previous day and unanimously resolved to change the CEO of GGS. The new CEO appointed is registered executive director Cha Young-su, an inside director. The board also approved the dismissal of CEO Lim and the appointment of inside director Lee Hun-jong as CEO. The change of bhc’s CEO will be finalized at the bhc board meeting on the 8th.

bhc Chicken was launched in 1997 as ‘Byeolhana Chicken’, changed its name in 2000, and was acquired by Genesis BBQ Group in 2004. Chairman Park, a professional manager from Samsung Electronics, entered the franchise industry in 2012 as the global CEO of Genesis BBQ. At the time of his appointment, BBQ was struggling with debts amounting to 81.4 billion KRW, and in 2013, bhc was sold to Rohatyn, a U.S. Citigroup private equity fund. Park separated bhc from BBQ, took office as CEO, and began independent management, becoming chairman in 2017. That same year, CEO Lim, also from Samsung Electronics, was recruited as a professional manager. Under the leadership of Chairman Park and CEO Lim, bhc showed clear external growth. Last year, with sales of 507.5 billion KRW, it surpassed 500 billion KRW for the first time in the industry, rising to the top position in the chicken franchise market.

Additionally, aiming to become a ‘comprehensive dining company’, bhc expanded its franchise business by acquiring Hanwoo specialty restaurant ‘Changgo43’, as well as ‘Jokbal Sanghoe’, ‘Keunmam Halmae Sundaeguk’, and ‘Gram Gram’. In 2021, it acquired ‘Outback’, the largest steakhouse brand in Korea, and last year signed an exclusive license agreement as the first global partner of ‘Super Duper’, a representative burger franchise in the western United States.

Despite external growth, there were also controversies during Chairman Park’s tenure. After moving to bhc, he engaged in prolonged litigation with BBQ. A notable case involved allegations that he illegally accessed BBQ’s internal computer network using illegally obtained IDs and passwords, infringing on trade secrets. In June last year, the Seoul Eastern District Court sentenced Chairman Park to six months in prison with a two-year probation for violating the Act on Promotion of Information and Communications Network Utilization and Information Protection. Including this, there are over 20 ongoing lawsuits between the two companies. This not only causes a war of attrition between the companies but is also widely seen as having a negative impact on the entire chicken franchise industry.

Currently, the board effectively running bhc reportedly views the company’s name being dragged into Chairman Park’s personal litigation issues as a risk. For bhc, which is aggressively expanding overseas, Chairman Park’s litigation risk appears to be a significant burden. An investment banking industry insider said, "While aggressive management might have worked in the past, it could be seen as outdated management that fails to meet current societal expectations."

Claims of Accumulated Conflict Between MBK and bhc Management

Besides litigation risks, there is analysis that accumulated conflicts between MBK and bhc management over major management issues such as mergers and acquisitions (M&A) and personnel exploded. Regarding this, CEO Lim revealed that there were conflicts with MBK over executive appointments. Lim said, "It’s not entirely unexpected, but it is surprising that the board meeting was held immediately. The conflict started when the CFO (Chief Financial Officer) was unilaterally appointed, and as a result, this outcome happened. In a power struggle, if they act that way, we have no choice." Lim added, "It’s regrettable, but since this is where we worked and we hold shares, we hope for the best. If there are unfair parts, we will handle them legally, and there should be no problems with bhc’s performance."

On the other hand, MBK drew a clear line, saying this was merely a decision by the holding company’s board to secure a management system suitable for the rapidly changing external environment, warning against overinterpretation. GGS, the holding company owning 100% of bhc’s shares, is known to have MBK holding 45%, two Canadian pension funds holding 45%, and Chairman Park holding 9%. The board members consist of two from MBK Partners, four from the two Canadian pension funds, one auditor, and Chairman Park. MBK stated, "bhc is not a company solely owned by MBK but one invested in by world-class pension funds. These global pension investors are our fund contributors, and MBK cannot make decisions arbitrarily on the board." They added, "The board made an extraordinary decision to respond to the worsening global management environment, and this should be seen as a rational decision by the capital market, not as a conflict or power struggle between MBK and bhc management."

Photo by bhc

bhc’s Remarkable Rapid Growth... Concerns Over Worsening Management Environment

During the period when Chairman Park and CEO Lim were in charge, bhc experienced rapid growth. The number of stores increased from 700 in 2013 to 1,400 in 2018, and 2,000 last year. Annual sales more than doubled from 240 billion KRW in 2017 to 507.5 billion KRW in 2022. Although it reached the top position in the domestic chicken industry, controversies followed. The Fair Trade Commission conducted on-site investigations due to excessive margin setting for franchisees after purchasing raw materials cheaply. Also, at a National Assembly audit by the Ministry of SMEs and Startups, there was criticism that profit-maximizing management targeting livelihood franchisees could damage the franchise ecosystem. For private equity funds, which need to increase corporate value and exit at the fund liquidation point, this is a burdensome situation. The deteriorating management environment due to prolonged high interest rates after COVID-19, rising raw material prices, and war also influenced the board’s decision.

The fact that the new leaders of GGS and bhc are financial and operational experts is also interpreted as a response to this. The new CEO of GGS, Cha, is a former CEO of Samsung Futures and was recently recruited as an operating partner at MBK Partners. The new CEO candidate for bhc, inside director Lee, is a financial expert who started at Anjin Accounting Corporation, worked at KB Kookmin Bank, Winia Mando, Geo Young, and currently serves as bhc’s CFO. A GGS board member explained, "This decision was made to strengthen the corporate reputation and brand value of GGS and its subsidiary bhc, pursue sustainable growth, and establish global-level corporate governance and compliance systems in response to the worsening external management environment."

This content was produced with the assistance of AI translation services.