GEN Korean BBQ Chain Had 35 Restaurants and a Market Cap of About RMB 1.85 Billion

This is an English adaptation of a FoodBud historical article originally published on January 14, 2024.

GEN Restaurant, the Korean barbecue chain founded by Jae Chang and David Kim in 2011, listed on Nasdaq in July 2023. At IPO, it raised US$43.2 million at an issue price of US$12 per share. As of the article date, its share price had fallen to US$7.87, giving the company a market capitalization of US$260 million, or about RMB 1.85 billion.

The first GEN Restaurant opened in Tustin. Its model is “Cook-It-Yourself,” which can reduce kitchen footprint and staffing needs. On the back end, ingredients are standardized in a way that resembles hotpot supply chains. For both Korean barbecue and Chinese-style barbecue formats, this model can support a degree of scale efficiency.

As of November 14, 2023, GEN Restaurant had 35 restaurants. The company had previously disclosed a potential store base of 250 restaurants.

Financials

For the year ended December 2022, GEN Restaurant generated annual revenue of US$160 million, or about RMB 1.14 billion, up 16.5% year on year. Adjusted EBITDA declined from US$34.1 million in 2021 to US$33.6 million in 2022. Net profit in 2022 was US$11.73 million.

In Q1 2023, food costs represented 32.6% of total revenue, labor costs 31.1%, and rent 7.8%.

GEN Restaurant also disclosed several related-party supplier relationships:

• Fast Fabrications, a subsidiary of company employee Don Kim, was a core equipment supplier and was expected to be acquired by GEN Restaurant.
• Pacific Global, wholly owned by founder Jae Chang and his relatives, supplied packaging and other products. It accounted for 23.5% of total procurement costs in 2021 and 21.2% in 2022.
• Wise Universal, 60% owned by founder Jae Chang, supplied ingredients. Purchases from Wise Universal represented 33.8% of GEN Restaurant’s total procurement costs in 2021 and 32.5% in 2022.
• U.S. Foods supplied part of GEN Restaurant’s food inputs. Purchases from U.S. Foods accounted for 39.2% of total food costs in 2021 and 57.6% in 2022.

Restaurant Model

GEN Restaurant locations range from 4,700 square feet to 12,000 square feet. Total indoor and outdoor seating ranges from 190 to 415 seats.

Leases are typically five or ten years. GEN Restaurant’s stated plan was to keep rent costs below 10% over time. From lease signing to opening, a new restaurant takes about 10 months on average.

As of May 12, 2023, each restaurant had about 73 employees, including full-time and part-time staff. Store manager training takes three to six months, while training for other employees takes 60 to 90 days.

For the 28 restaurants opened before the end of December 2022 and operating for more than 18 months, average annual sales per restaurant were US$5.9 million. For the 28 restaurants opened before the end of March 2023 and operating for 18 months, average annual sales per restaurant were US$6.0 million.

New-store buildout costs were about US$1.8 million for restaurants opened in 2018 and 2019, and US$1.9 million for restaurants opened in 2022. Before the pandemic, the 21 restaurants then open had an average investment payback period of 1.4 years.

Looking ahead, GEN Restaurant expected future new restaurants to cost US$3.0 million on average to build, reach AUV of US$5.0 million, and deliver an investment payback period of two and a half years.

Note: IPO, market-cap, share-price, store-potential, buildout-cost, AUV and payback figures are historical as reported in January 2024.