The company, which runs multiple food and beverage brands, including Cafe Knotted, a homegrown donut brand that once created a doughnut craze across Korea, is said to be in talks with two potential buyers after verbally tapping demand, said sources.
It is said to be hoping to raise more than 80 billion won ($5.7 million) from the sale, which includes not only Cafe Knotted but other brands such as Hojokban and Littleneck.
The company’s asking price is 16 times higher than its earnings before interest, taxes, depreciation and amortization (EBITDA) for 2024.
GFFG reported 63 billion won in revenue last year, 85% of which is from Cafe Knotted. This suggests that the company’s valuation will be determined based on the value of the dessert cafe brand, which posted 5 billion won to 6 billion won in EBITDA in 2024.
Cafe Knotted store inside a Starfield mall (Courtesy of GFFG) As of 2024, GFFG’s largest shareholder with a 53.4% stake is its founder and Chief Executive Lee Joon-beum. The remaining shares are held by other financial investors, including Altos Ventures, NH Investment & Securities Co., Korean Development Bank and Musinsa Partners.
TOO CHEAP?
To these FIs, the asking price is, however, too cheap.
Since the funding, however, Cafe Knotted’s popularity has fallen, largely due to the rapid expansion of its chain stores, which has made the cafe less desirable.
Its Instagrammable donuts in pastel packaging went viral soon after their debut in 2017, thanks largely to their perceived exclusivity, with only a handful of stores carrying them at first.
Following the expansion of its operations through franchise contracts, however, the premium value of its donuts has noticeably diminished.
Cafe Knotted characters Smiley and Sugar Bear inside a Cafe Knotted flagship store (Courtesy of Yonhap) Yet some have claimed the company merits a higher price tag, citing its capability to leverage its brands across new applications and evolve them into intellectual property content.
LIFESTYLE PLATFORM PROVIDER
With its signature characters Sugar Bear and Smiley, Cafe Knotted stands out among dessert cafes in the IP business.
It has succeeded in diversifying its revenue sources with other businesses, such as Knotted World, a cultural space offering experiences beyond desserts.