In the domestic market, private equity funds have become firmly associated with corporate restructuring and job insecurity. Although public sentiment has turned cold following a series of negative incidents, there are actually many cases where these funds have saved and grown companies.

Edaily has spotlighted cases where private equity funds invested in growth rather than workforce reductions, thereby boosting corporate value. Through examples of companies that faced concerns and misunderstandings simply because they were acquired by private equity funds but successfully turned themselves around, we examined how the recruitment of professional managers, global expansion, and job creation led to improved performance and growth.

Through this, we aim to highlight that investment approaches and management strategies determine a company’s success or failure, and to underscore the need to rethink the prejudices surrounding private equity funds. [Editor’s Note]

[E-Daily Marketin JI YEONG-EUI YunJi Kim Reporter] “It’s true that opening additional stores brings immediate revenue, but we will halt this expansion.”

The CEO in charge of Gongcha Korea could hardly believe his ears when the major shareholder—a private equity fund (PEF)—made this decision. From the franchise headquarters’ perspective, opening additional stores is the surest way to “make money.” Every time a new store opens, franchise fees and royalties come in, and the headquarters’ performance improves immediately. If store expansion stops, that steady cash flow stops as well.

Nevertheless, UCK Partners, the private equity fund manager and former majority shareholder, made the exact opposite decision while formulating Gongcha’s growth strategy. They decided to invest in people and systems for the time being, rather than expanding the number of stores. It was a choice to forgo short-term profits. Why did UCK halt store expansion?

Not all private equity acquisitions result in cost-cutting and workforce reductions. Behind the scenes of the capital markets—unseen by the public—there are numerous cases where firms have grown significantly by investing in growth rather than cutting costs after an acquisition. Among these, Gongcha stands out as a case where a private equity firm deliberately avoided the path to immediate profit—even though it knew it existed—and instead drove the company’s remarkable growth.

Gongcha: Profitable but Vulnerable… Sold to Private Equity Firm UCK

UCK first took a close look at Gongcha in 2014. From an investor’s perspective, Gongcha was an attractive company based solely on its revenue figures. Cash flow was strong, and its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin was high at around 30%. As a Taiwan-based brand making its debut in South Korea, Gongcha’s brand recognition was also rising rapidly.

However, the deeper UCK delved into its due diligence, the more a different picture emerged. While the company was doing well, it was not an organization run by established systems. There was no organizational chart, and the roles of HR, marketing, and operations were not clearly defined. Most of the staff were young employees in their mid-20s, and the company was operating on a precarious footing, with most employees simply carrying out their daily tasks based on verbal instructions. As the number of stores increased, various incidents and problems arose, but there was no systematic framework in place to manage them.

UCK, which focused on “investing in growth companies,” viewed this not as a risk but as an opportunity for growth. A loyal customer base for the products and brand had already been established, and from the franchisees’ perspective, the structure allowed for low-capital startup, offering high potential for expansion. The issue was not “what to sell” but “how to grow the business.” UCK judged that since the products and services were already proven, simply adding proper management would transform both the size and quality of the company.

After deciding to acquire the company, this philosophy was reflected in the transaction structure. UCK proposed acquiring 70% of Gongcha’s shares rather than 100%. Under this structure, the founders retained the remaining 30% and would share in the fruits of the company’s growth alongside the investors. It was a deal based on a long-term growth scenario, rather than a plan to buy and sell quickly within a short timeframe.

Why Did the Private Equity Fund Halt “Immediately Profitable Store Openings”

? Immediately after the investment, UCK recruited professional managers with extensive external F&B experience to fill the CEO and key executive positions, and began redesigning the HR, marketing, and operations organizations. However, a crisis struck sooner than expected. In the first one to two years following the acquisition, Gongcha’s growth began to slow. While headquarters’ revenue remained stable thanks to new store openings, same-store sales (SSSG) began to decline steadily. This was the warning sign most feared in the franchise industry. Even if some franchisees slipped into the red or a few went out of business, headquarters could still turn a profit for the time being; however, if left unchecked, the entire system could eventually collapse all at once.

After much deliberation, UCK concluded that it should halt new store openings and focus on existing locations. Given that opening a single store brought in tens of millions of won in cash, stopping expansion was tantamount to sacrificing short-term performance. Although the professional manager in charge of Gongcha’s operations warned of a decline in performance following new store openings, he pushed the principle that sacrificing immediate gains was necessary for long-term growth. Following the decision to halt expansion, Gongcha’s revenue and EBITDA did indeed decline rapidly. EBITDA, which had once stood at around 13 billion won, even dropped to the 3 billion won range.

Instead of expanding the number of stores, the company focused on strengthening the brand’s fundamentals. It enhanced employee benefits to retain staff at existing stores and increased new hires. It significantly expanded its team of supervisors and quality control (QC) personnel to manage franchisee quality and strengthened its reward system for long-term employees. The company also ramped up the development of seasonal new menu items and large-scale marketing campaigns. While the decision to increase labor costs amid declining performance seemed risky, UCK judged it to be an essential step toward enhancing corporate value. This was because the company believed that, for a food and beverage (F&B) company to deliver high-quality products to consumers, the most important factor was the employees working in the stores. There was a clear conviction that hiring and retaining staff directly translated into corporate value.

This new management approach completely transformed Gongcha’s business structure, which had been like a sandcastle built too high. After meticulously managing and investing in its stores, same-store sales bottomed out and began to rebound, continuing an upward trend for several consecutive quarters. Only then did UCK and its management resume store openings. Rather than prioritizing the pace of expansion as before, they adopted a cautious approach, expanding only after confirming the profitability of existing stores.

'Solidifying Its Foundation,' Gongcha Korea Even 'Swallows' the Headquarters

The pinnacle of this structural growth was the acquisition of the Taiwanese headquarters. Before UCK’s acquisition, Gongcha Korea was merely an operator with a franchise agreement with the Taiwanese headquarters; even to introduce a single new menu item, it had to wait for approval from headquarters. Strawberries in spring, green grapes in summer. With Korea’s four distinct seasons, beverage demand and consumption trends shift rapidly with each season, but at the time, Gongcha’s decision-making structure struggled to keep pace with these changes. There was a growing awareness that the brand was failing to fully realize its potential because menu development and launches lagged behind market trends. Having properly solidified the foundations and steadily grown each store, the conditions were ripe for further expansion.

In fact, the acquisition of the Taiwanese headquarters had long been a growth scenario that UCK had kept in mind since the early stages of considering the acquisition of Gongcha. Recognizing that there were limits to increasing corporate value as a mere domestic franchisor, the company had mapped out a plan to stabilize its Korean operations, expand overseas—including into Japan—and ultimately transition to a brand-ownership structure. It was precisely this “global blueprint” that led the initial management team—who had brought the Gongcha Korea business rights into the country and were operating them—to decide to sell the business to UCK.

After successfully acquiring the Taiwanese headquarters in 2016 under UCK’s leadership, Gongcha secured control over brand operations. By transitioning from a mere Korean franchisee to a franchisor owning a global brand, the company became capable of launching new menu items four times a year, implementing flexible localization strategies tailored to each country, and executing targeted marketing campaigns. This was the moment Gongcha transformed from a brand “waiting for permission” into a “market-leading brand.”

Starting with its entry into Japan, Gongcha rapidly expanded beyond Asia to the United Kingdom and the United States. By the time UCK resold the company to another investor to recoup its investment, it had grown into a global franchise operating 1,120 stores across 17 countries worldwide. Forty-two percent of the company’s total revenue came from overseas, marking a complete transformation from its pre-acquisition structure, which consisted solely of 255 stores in South Korea.

This growth led to increased employment. The number of headquarters employees, which stood at 39 at the time of the acquisition, had risen to 334 by the time UCK exited its investment. This is why Gongcha was named one of the “Top 100 Companies for Job Creation” by the Ministry of Employment and Labor in 2015. Even during the process of reselling Gongcha, UCK persuaded the prospective buyer to include a clause guaranteeing employee jobs in the contract. They successfully argued—though it was no easy feat—that arbitrarily laying off the “people” who make up Gongcha would undermine the company’s operational system and accumulated growth know-how. In essence, their investment philosophy—which viewed employment not as a cost but as part of the company’s value—persisted right up to the very end.

The Other Side of Private Equity We Don’t Know About

The “Gongcha” investment—which is consistently cited as a best-practice case study in Harvard’s MBA program—raises questions that challenge the conventional view of private equity as a single, monolithic framework. This is because private equity is not merely capital that generates profits by cutting costs; it can also serve as a partner that designs the sequence and structure of growth.

Among the companies in which UCK has invested, there are quite a few success stories worth noting besides Gongcha. Among its portfolio companies, F&D Net received the Prime Minister’s Award for Excellence in Gender Equality in Employment. Medit and Osstem Implant were awarded the Tower of Export and Technology Awards, and several other portfolio companies have received government commendations and industry awards in the fields of environment, employment, and technology. These are achievements that cannot be attained by simply adhering to the basic private equity strategy of “buying low and selling high.”

Public perception of private equity funds remains largely one-sided. However, Gongcha’s growth story demonstrates that a company’s trajectory can change depending on the choices made by its private equity fund. UCK’s decision to view employment not as a cost but as a prerequisite for growth ultimately paid off in terms of corporate value. This is another side of private equity funds that we were not previously aware of.