8-K: Yoshiharu Global Co. Completes Acquisition of Three Las Vegas Restaurants for $3.6 Million

Yoshiharu Global Co. has finalized the acquisition of three Las Vegas restaurants for $3.6 million, funded through a mix of cash, a promissory note, and a convertible note.

Summary

• Yoshiharu Global Co. has acquired three restaurant entities in Las Vegas: Jjanga, HJH, and Aku.
• The total purchase price was $3.6 million, consisting of $1.8 million in cash, a $600,000 promissory note, and a $1.2 million convertible note.
• The acquisition was structured to allow for separate closings of the restaurants at the request of a lender, with each closing effective as of April 20, 2024.
• The promissory note will be repaid in two equal installments of $300,000 due on November 30, 2024, and November 30, 2025, without interest.
• The convertible note accrues interest at 0.5% per annum and matures one year from the closing date, with the option for the seller to convert it into Class A common stock.
• The seller, Mr. Jiyuck Hwang, will serve as the Managing Director of the restaurants with an annual base salary of $180,000 and a performance bonus schedule, including up to $100,000 in Restricted Stock Units.
• The employment agreement has an initial term of 3 years, subject to extension or early termination with 60 days written notice.

Sentiment

Score: 7

Explanation: The document conveys a positive outlook with the acquisition expected to drive revenue and profitability. However, the use of debt and potential dilution temper the overall sentiment.

Positives

• The acquisition is expected to bring in $6 million in annual revenue in 2024.
• Yoshiharu anticipates breaking even in the second half of 2024 and becoming profitable in 2025.
• The seller will serve as Managing Director, ensuring continuity and expertise.
• The acquisition expands Yoshiharu's presence into a new state, Las Vegas.
• The deal includes a performance-based incentive for the Managing Director, aligning interests.

Negatives

• The acquisition involves a promissory note and a convertible note, adding debt to the company's balance sheet.
• The convertible note could potentially dilute existing shareholders if converted to stock.
• The company is relying on the acquired restaurants to achieve profitability in 2025.

Risks

• The company may not achieve the expected $6 million in annual revenue from the acquired restaurants.
• The company may not break even in the second half of 2024 or become profitable in 2025 as anticipated.
• The conversion of the convertible note could dilute existing shareholders.
• There is a risk that the company may not be able to successfully integrate the acquired restaurants into its operations.
• The company is relying on the seller to manage the restaurants effectively.

Future Outlook

The company anticipates breaking even in the second half of 2024 and becoming profitable in 2025, leveraging the financial success of the acquired restaurants to expand the Yoshiharu brand.

Management Comments

• James Chae, Yoshiharu's President, CEO, and Chairman of the Board, stated that he is pleased to announce the successful acquisition of three renowned Las Vegas restaurants.
• Mr. Chae also mentioned that with $6 million in annual revenues expected in 2024 from the acquired restaurants, they eagerly anticipate leveraging the financial success seen with these stores to further expand the Yoshiharu brand into a new state.
• Mr. Chae stated that through this strategic acquisition, they anticipate breaking even in the second half of 2024 and become profitable in 2025.

Industry Context

This acquisition reflects a trend of restaurant chains expanding through strategic acquisitions to increase market share and revenue. The move into Las Vegas is a significant step for Yoshiharu, indicating a desire to grow beyond its Southern California base.

Comparison to Industry Standards

• The acquisition of three restaurants for $3.6 million is within the typical range for small to medium-sized restaurant acquisitions.
• The use of a combination of cash, promissory notes, and convertible notes is a common financing method in such deals.
• The expected $6 million in annual revenue from the acquired restaurants is a significant increase for Yoshiharu, which currently operates 11 restaurants.
• The company's goal to break even in the second half of 2024 and become profitable in 2025 is an ambitious but achievable target, depending on the integration and performance of the acquired restaurants.
• Comparable companies in the restaurant industry, such as The Cheesecake Factory or Texas Roadhouse, often use acquisitions to expand their footprint and revenue streams.

Management Changes

Stakeholder Impact

• Shareholders may see potential dilution from the convertible note but also benefit from increased revenue and profitability.
• Employees of the acquired restaurants will have new management and potentially new opportunities.
• Customers of the acquired restaurants will experience a change in ownership and potentially new offerings.
• Suppliers of the acquired restaurants will have a new business relationship with Yoshiharu.
• Creditors of the acquired restaurants will be impacted by the change in ownership and the assumption of certain liabilities.

Next Steps

• The company will file the required financial statements with the SEC.
• The company will integrate the acquired restaurants into its operations.
• The company will work to achieve its goal of breaking even in the second half of 2024 and becoming profitable in 2025.

Key Dates

Keywords

restaurant acquisition, ramen, Las Vegas, Yoshiharu Global, convertible note, promissory note, restaurant operations, expansion