KBP Foods, the large Overland Park, Kan.-based Yum! Brands Inc. franchisee, on Monday said it has acquired 78 additional KFC locations in Texas, Illinois and Kansas.

KBP bought the locations in three separate deals, giving the operator 530 locations in 20 states. The company says the locations have revenues of close to $600 million.

It’s the latest, major deal since KBP management led a buyout of the company’s private equity owners, including a 91-unit acquisition last year. KBP has used a series of acquisitions to grow into one of the country’s biggest restaurant operators.

The company said it has increased its store count by 166 locations this year through a combination of new construction and $185 million in acquisitions.

The latest purchase includes 33 restaurants in Chicago and four locations in Lawrence and Topeka, Kan., as well as 41 locations in Houston and Austin, Texas. The stores in Kansas and Chicago were acquired from other franchisees while the stores in Texas were acquired from KFC.

“We have achieved meaningful growth by adding density in key markets such as Chicago and Texas,” CEO Mike Kulp said in a statement. He said acquisitions increase business value and provides advancement opportunities for employees.

The company refinanced its debt earlier this year with AB Private Credit Investors. KBP said the debt could allow it to double in size over the coming years.

Franchisees have been using readily available credit to buy up smaller operators and grow larger, particularly in older restaurant chains such as KFC, Taco Bell, Burger King and The Wendy’s Co.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Steve Rockwell has more than 35 years of experience in the restaurant industry, and served as Ruby Tuesday’s vice president of finance from 2008 to 2010. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.

Ruby Tuesday agreed this week to be acquired by the private-equity firm NRD Capital for $2.40 per share, plus the assumption of debt. 

The enterprise value of the acquisition is approximately $340 million, comprised of $146 million to acquire the stock and $194 million of net debt. That’s a far cry from Ruby Tuesday’s peak enterprise value of approximately $2.4 billion, including equity of $2.2 billion, attained in spring 2004. 

Some historical context is important to fully understand how Ruby Tuesday’s financial condition deteriorated. During the first part of the 2000s, Ruby Tuesday was on a roll. The company was expanding and same-store sales were rising through fiscal 2004. Ruby Tuesday had a share repurchase program and was actively buying back stock at the same time it was investing heavily in growth. Cash flow was strong and, cumulatively, from 2001 through 2004, the company outspent its cash flow by only about $13 million. As a result, debt was relatively modest. 

But in the mid-2000s, conditions began to change, with 2005 the first year of many that same-store sales declined, falling 7.1 percent at company-operated restaurants. Partly reflecting the soft sales, cash from operations declined 16 percent, or $36 million. Unit expansion was in place, so capital expenditures increased $10 million from 2004 to a record $161 million, with another $64 million of cash used to repurchase shares.

Around this time, activists were circling several restaurant companies and viewing their real estate holdings as a potential source of cash through sale-leasebacks to pay dividends or to take the company private. Partly to fend off these potential activists, Ruby Tuesday, which owned 258 of 579 company-operated restaurants at the end of fiscal 2005, accelerated its share purchase program in 2006 and 2007, and bought back nearly $400 million of stock. Unit expansion continued apace, with capital expenditures totaling just under $300 million for 2006 and 2007. Internally generated cash flow declined, requiring the company to add nearly $350 million of debt. Another $76 million of debt was added in 2008, resulting in debt increasing to $588 million in 2008, from $168 million in 2004.

Same-store sales recovered in 2006, but declined again in 2007, and dropped nearly 10 percent in 2008, as the company unsuccessfully attempted to reposition itself to appeal to more upscale guests. Same-store sales never recovered, earnings have been under pressure ever since, and the company’s stock has spent most of the last 10 years under $10 per share, and the last two years under $5 per share.

There are several lessons to learn from this story:

• Real estate has tremendous value. Management evaluated a large sale-leaseback at least twice in the 2000s to raise cash to pay off debt. If it had done so, it’s likely that Ruby Tuesday would be significantly worse off than it is now. Rents would have been based on higher average restaurant sales, and landlords are likely to have been less forgiving than lenders. Financial engineering can return cash to shareholders, but it can also increase the risk profile significantly, especially in a difficult sales environment.
• Repositioning an established brand is difficult. When I was Ruby Tuesday’s vice president of finance and in charge of investor relations, from 2008 to 2010, investors asked for examples of brands that had repositioned themselves similarly to Ruby Tuesday. I cited Red Lobster and Olive Garden as two chains that had evolved from their origins. Evolved is the key word: Those brands changed over a period of years, while Ruby Tuesday attempted to change over a period of months. The company also undoubtedly confused customers by couponing aggressively to drive traffic, a move that contradicted the push to move upscale.
• Pay attention to early warning signs. This can be very difficult, especially for public companies that have external pressures, because an issue can be short-term and reacting to it could result in disrupting operations. In Ruby Tuesday’s case, the 2005 decline in same-store sales was prophetic. In the context of the time, when competition was intensifying, the 7.1-percent decline followed by an anemic increase of only 1.4 percent in fiscal 2006 was a signal that the company had issues. Management should have slowed expansion sooner and cut back or eliminated the share repurchase program immediately, the latter being easier to do. Either or both of those actions would have conserved cash and lowered debt levels.

Today’s restaurant market bears some similarities to the one Ruby Tuesday faced in the mid-2000s: Activists are circling a number of underperforming brands; expansion in recent years is contributing to a softer sales environment; and credit is more available than it has been since the recession.

Patience is required by investors before buying a stock, after an issue is first priced into the stock. Companies need to exercise the same restraint before buying back stock. For instance, Chipotle Mexican Grill repurchased stock at nearly $580 per share in 2015, and $450 per share in 2016, after a series of foodborne illness outbreaks, compared with the current stock price of about $330 per share.

I am a firm believer that operators should hold onto real estate as a hedge against a downturn, rather than opting for sale-leasebacks. Impact investors should approach monetizing real estate with caution and stress-test sales to determine how much of a decline would result in a cash squeeze, while understanding that changing the direction of sales from negative to positive is very difficult.

Twenty years ago this month, PepsiCo spun off its restaurant division into a separate company. The result was the creation of one of the largest, most enduring restaurant companies on the planet.

Yum! Brands Inc., based in Louisville, has become a 44,000-unit global behemoth, a company that has brought KFC’s fried chicken to Uganda — and Pizza Hut stuffed crusts into Indonesia. Consumers in North Pole, Alaska can get one of Taco Bell’s Naked Chicken Chalupas.

“If you invested $10,000 into Yum in 1997,” CEO Greg Creed said in an interview with Nation’s Restaurant News, “it would be worth $170,000 today.”

The company’s growth has not always gone so smoothly. Yum has made some mistakes over the years, and the company has made numerous changes in its operations and organizational structure.

But, following a spinoff of its own, Creed believes Yum has the structure in place to grow for years.

“The growth potential for Yum is limited only by our imagination,” he said. 

The big spinoff

Creed said he is one of the few employees left from the 1997 spinoff. He took a position with Yum Brands’ Australia 23 years ago, rose through the ranks, and was named CEO of Taco Bell in 2011. Creed replaced David Novak as Yum’s CEO on Jan. 1, 2015.

“I give David a lot of credit for setting bold goals but also creating an amazing culture,” Creed said.

At the time of the PepsiCo spinoff, Yum had about 29,000 locations and $4.4 billion in debt. Novak set plans to double in size, something Yum has since nearly achieved.

“Our brands are stronger,” Creed said. “It’s a more global business and a much more focused business.”

Since the spinoff, Yum has generated a total return for shareholders of more than 1,600 percent. Companies in the S&P 500 index generated a 280 percent return over the same period, according to the company.

Over the 20 years, Yum has established a willingness to take risks to drive growth. Some of those efforts didn’t work out as planned, notably the company’s 2002 acquisition of Long John Silver’s and A&W. Yum initially wanted to create multi-branded units with the combination of the acquired brands and its existing concepts. Nine years later it sold A&W and Long John Silvers, and largely ditched co-branding.

But Yum’s victories have been enormous, none more so than its push for international growth. One such victory came in 2010, when Yum bought the Russian chain called Rostik’s. The brand has since been converted into KFCs, helping Yum grow to 550 KFCs in Russia.

“Despite all the boycotts and all the other things, I think we delivered 30 percent system sales growth the last five years,” Creed said. “When I talk with other executives about Russia, no one is talking about the success they’ve had.”

Yum’s focus on global growth has had an impact on company profits. At the time of the PepsiCo spinoff, 20 percent of the company’s profits came from outside the U.S. Today, that’s up to 50 percent — an amazing increase considering that one of its three brands, Taco Bell, has little presence internationally, something Yum wants to change. 

The China spinoff

KFC was the first Western fast food company to open a location in China, in Beijing, in 1987. The brand has gained a first mover advantage there. Pictures of Colonel Sanders are nearly as common there as pictures of Chairman Mao.

Yum kept most of its China stores company owned, rather than franchising like it does in most of the rest of the world. By 2016, Yum had more than 7,000 locations, including KFC and Pizza Hut, and China represented more than half of the company’s total revenues.

Sales in China slowed between 2012 and 2015 amid a pair of food safety crises. The slowing sales added pressure on the company to spin Chinese operations off in 2016. It was the first time a restaurant company spun off part of its operations while retaining ownership of its brands.

Yum China is now a franchisee of Yum Brands. And Yum is refranchising stores in other markets, with the plan to get to 98 percent franchised by the end of next year.

Shareholders thus got stock in a high growth franchisee in a rapid growing market, China, and a major franchisor in Yum. Investors have loved it. The combined stock of the two companies has increased 35 percent since the spinoff.

“From the shareholder perspective, it looks like it was the exact right thing to do,” Creed said. “We were highly franchised outside of China, and high equity inside China. We felt like we had to pick a lane. And the lane we decided to pick was to be more highly franchised.”

In so doing, Yum Brands greatly reduced its capital spending demands, from $1.1 billion to $100 million, giving the company $1 billion in free cash flow that it can return to shareholders or invest in the company.

“To me, it was the right decision, and the results have demonstrated it was the right decision,” Creed said.

He also noted a 2014 decision by the company to reorganize Yum into divisions based on its three brands, instead of divisions based on geography. Few employees in the company now work on more than one brand, and the divisions have helped Yum be a more “brand focused company.”  

Future plans: Acquisitions ahead?

The ink was barely dry on Yum Brands Inc.’s plan to spin off its China operations a year ago when analysts began wondering if the company would buy something else. With its brand-centric alignment and a focus on franchising, another acquisition would make sense.

In addition, the company’s plan is to grow system sales by 7 percent a year by the end of 2019. That’s aggressive for a company with 44,000 locations. Another new brand would help achieve that goal.

But Creed said that’s not the plan.

“Everyone says that,” he said. “I personally believe there is so much growth potential with these three brands and opportunities like delivery on all three that I’m really focused on accelerating growth of the three brands, broadening the geographical presence and expansion.

“You never say never. But I believe I’ve got the organization focused on how we accelerate growth with these amazing brands.”

And it wouldn’t take much more to get to that 7 percent sales goal. Worldwide system sales already increased 6 percent in the second quarter ended June 30.

Creed believes the company can achieve that goal with its three existing brands, simply by focusing on unit growth, while taking advantage of current trends.

The company is pursuing delivery.

“Delivery is what the drive thru was 40 years ago,” Creed said. “What comes with that are newer occasions and a higher check.” That opportunity comes with all three brands, he said.

He also believes there’s “massive opportunity to build more units.”

Taco Bell, for one, has barely scratched the surface of its international growth capability. “It’s a tiny brand outside the U.S. compared with KFC,” he said. “We’re really just getting started.”

Creed said that KFC, which now has 21,000 locations, could get to 60,000 global units. “We believe we can expand in a lot of countries,” he said. “We’re just getting into sub-Saharan Africa.”

“Somewhere in the world, a KFC opens every eight hours,” Creed said. “Roger thinks we could get to every five hours.”

And while other segments of the restaurant industry could prove attractive, Creed believes Yum Brands is in the three segments with strong, global potential.

“I love being in Mexican, pizza and chicken,” Creed said. “Those three categories are growing faster than any other category in the industry. We’re ideally positioned in all three.”

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

This post is part of the On the Margin blog.

Industry sales and traffic have been weak for the past two years, and restaurant-chain stocks have struggled as a result.

But that’s certainly not keeping private investors from putting their money into the industry — something expected to continue in the coming year.

In just the past two-plus weeks, Kevin Durant invested in Pieology; Roark Capital invested in Culver’s; and &pizza received another cash infusion of at least $25 million.

“There’s a core group of up-and-coming brands scaling quickly that are on trend with consumer preferences,” said Chris Sciortino, managing director with Robert W. Baird & Co. “There’s been a ton of capital flowing into those concepts.”

Sciortino believes, in fact, that we are “still in the early innings of a pretty massive shift” in the restaurant industry, as legacy, old-school brands retrench and newer concepts take their place.

This shift is still on, despite a difficult two years.

Same-store sales have declined 13 of the past 16 months, according to MillerPulse, while traffic has fallen for 23 of the past 24 months. Public investors who a couple of years ago couldn’t get enough of the fast-casual sector — sending stocks in chains like Noodles & Co. and The Habit Restaurants Inc. more than doubling — have soured on restaurants this year.

Still, Sciortino said, “There’s plenty of optimism from a capital perspective.” Private investors are looking for brands taking share from older concepts, and he says that merger & acquisition activity in the restaurant space is picking up.

The restaurant industry has been the recipient of a massive amount of investment cash in recent years, based almost entirely on the idea of this shift.

As I reported earlier this year, there were 61 announced investments in chains with 20 or fewer locations between 2012 and 2016, two-thirds of them were to fast-casual concepts.

On the other end of the spectrum, private equity and strategic investors have paid record prices this year for more established chains.

Consumer investors have shifted a lot of money into the restaurant space in recent years, believing that Internet companies like Amazon are rendering other consumer sectors effectively moot. Private equity firms that never invested in the space have made investments in restaurants in recent years.

In addition, strategic investors are buying up restaurants too, as Darden Restaurants Inc. did earlier this year with its acquisition of Cheddar’s Scratch Kitchen.

The problem is that all this euphoria has led to something of a bubble. Investors put money into copycat concepts, or they backed concepts with over-aggressive sales and unit growth projections.

When investors put money into a business, they’re going to want a return, and the best way to generate a return is through unit growth. The growth has driven up real estate costs while it has increased competition, hurting same-store sales — particularly at fast-casual chains.

In the first half of this year, publicly traded fast-casual chains have reported average same-store sales declines of 2 percent, far worse than either quick-service or casual dining concepts. The performance suggests investors might have exaggerated the consumer shift that drove so many private equity funds to invest in the sector.

Sciortino doesn’t think so. But, he said, “There’s definitely been a chase with capital and valuation and possibly unrealistic expectations for a lot of these growth brands.”

He still believes that consumers are shifting broadly toward newer growth concepts, and that this “is a 10-year shift.” But he also believes chains must “be mindful of how quickly it happens.”

“The thing for the sector and for capital investment is to make sure the shift happens thoughtfully over time and doesn’t get euphoric with doubling and tripling unit counts,” Sciortino said. “It still needs to be done with a degree of discipline.”

Ultimately, he believes the period could be good for the newer generation of restaurant chains, by making growth projections more realistic while giving companies time to build infrastructure.

“There’s definitely both strategic and private equity capital available,” Sciortino said. “There’s a high level of interest. And there’s a willingness to pursue assets at premium valuations. I still think there’s a fundamental belief that the shift is real. And that creates opportunity.”

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

This post is part of the On the Margin blog. 

The investment firm JAB Holding Co. has bought a lot of coffee and breakfast chains recently.

Dunkin’ Brands Inc.’s flagship concept, Dunkin’ Donuts, sells coffee and breakfast.

In Wall Street’s eyes, that means JAB may soon come for Dunkin’, and talk of a potential buyout helped Dunkin’s stock surge nearly 8 percent on Monday. 

Private equity groups are still interested in restaurants, and perhaps nobody has been making as big a push into this industry as JAB, the investment firm from the Reimann family out of Luxembourg.

We’ve felt for a time that JAB would eventually buy Dunkin’, given JAB’s seemingly insatiableappetite for breakfast chains as well as Dunkin’s vast potential. Dunkin’ periodically is subject to sale rumors, and few buyers have the wherewithal to take the company private — JAB is one of them.

Instead, JAB went out and bought Panera Bread. That calmed down rumors of a Dunkin’ acquisition, but those are apparently over.

Theoretically, nobody has any business buying Dunkin’ right now. The stock is near its all-time high after Monday’s trading, and now has an enterprise value multiple of just under 16 times EBITDA — or earnings before interest, taxes, depreciation and amortization. 

Any buyer would have to exceed that multiple by a couple of turns to entice investors and the company to sell. Dunkin’ has a ton of white space for expansion in the U.S. It has some interesting plans to convince consumers to buy more of its coffee. And it has a lot of growth potential in international markets.

This is why JAB makes sense. The firm is no stranger to sky-high multiples — it paid nearly 22 times EBITDA for Peet’s in 2012. The $7.5 billion acquisition of Panera was at a multiple of 19.5.

Those are the types of multiples that JAB is willing to pay, and it’s the type of multiple JAB would have to pay in this instance.

How much would Dunkin’ cost? Consider this: A 25-percent premium on Dunkin’s share price right now would give it a multiple close to 19. A 33-percent premium would give it a multiple of about 20 and would be a deal valued at about $9 billion.

Baird Analyst David Tarantino speculated that Dunkin’ could fetch an 18x multiple. I think that’s on the low end of what it would take to buy the company. 

Traditionally, buyers don’t like paying these sorts of multiples for established chains because they usually want to sell them or go public again in a few years — and they want to make money on those investments. 

Because JAB has no such timeline, it is willing to pay a high price to get what it wants, much like Burger King owner Restaurant Brands International Inc. 

But there are risks associated with any such deal. The coffee market is incredibly competitive. Dunkin’ faces competitors from Starbucks Corp. to McDonald’s Corp., as well as a slew of convenience stores. RBI’s Tim Hortons is also working to muscle in on Dunkin’s turf. 

Then again, with a portfolio that includes Peet’s, Caribou Coffee, Einstein, Panera, Stumptown Coffee Roasters and others, JAB seems unconcerned about coffee competition.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Starbucks Corp. said Thursday that it has agreed to sell its Tazo tea brand to Unilever PLC for $384 million in a deal that will enable the coffee giant to focus on a single brand of tea, Teavana.

Unilever will acquire Tazo’s recipes, intellectual property and inventory. Starbucks acquired the brand in 1999 for $8.1 million, five years after Tazo was founded.

Tazo is primarily sold in grocery, convenience and mass merchant stores.

The deal for Tazo comes months after Starbucks said it would close all 379 of its Teavana locations and would focus on selling Teavana inside its coffee shops, rather than at stand-alone retail locations.

Starbucks said that, by selling Tazo, it would “sharpen its focus on its up-level tea strategy with Teavana.” The company plans to invest in growth, innovation and development of Teavana.

Tea sales inside of Starbucks locations are growing at double digits annually, particularly as the chain expands in Asia and other markets where tea is popular. The company believes the Teavana business could be worth more than $3 billion in five years, and over the past 12 months the company has sold $1.6 billion worth of Teavana beverages inside its stores.

“With our growth strategy for premium tea exclusively focused on Teavana, we are pleased to transition our Tazo business to Unilever,” Starbucks CEO Kevin Johnson said in a statement.

The company also announced that it generated $5.7 billion in revenue in the company’s fiscal fourth quarter ended Oct. 1. The company also reported narrower operating margins and earnings per share of 54 cents. The numbers fell below investors’ expectations, and the company’s stock was down about 6 percent in after-hours trading Thursday.

Same-store sales increased 2 percent globally, the company said, including a 1-percent increase in transactions.

U.S. same-store sales increased 2 percent, including a 1-percent increase in the number of customers. Starbucks said same-store sales would have increased 3 percent without the impact of hurricanes Harvey and Irma.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Ron Shaich is bringing Au Bon Pain back into the fold as he makes a graceful exit. 

Panera Bread said Wednesday that it has a deal with private-equity firm LNK Partners to acquire the Boston-based Au Bon Pain Holding Co. Inc. — which Panera sold 18 years ago.

Terms of the deal were not disclosed, but Panera said it acquired the 304-unit Au Bon Pain to intensify its growth in nontraditional areas like hospitals, universities, transit centers and urban locations.

The company said in a release that Panera's CEO Shaich will step down effective Jan. 1, 2018, to split his time between Panera, JAB and other interests. 

Shaich managed a cookie franchise in 1981 when he and his late partner Louis Kane created Au Bon Pain in 1981. The company went public in 1991.

In 1993, Au Bon Pain acquired a little-known bakery-café chain called Saint Louis Bread Company. They renamed the chain Panera Bread. In 1999, opting to focus on Panera, the company sold Au Bon Pain to Bruckmann, Rosser, Sherrill & Co.

Panera Bread has since grown to become one of the biggest chains in the U.S., with more than 2,000 locations and $5 billion in system sales.

“We are bringing Au Bon Pain and Panera together again,” Shaich said in a statement.

The sale comes just months after Panera was sold to the investment firm JAB Holdings in a $7.5 billion deal, taking the chain private.

Au Bon Pain, much like Panera, is a fast-casual chain that serves sandwiches, breads, pastries, salads, soups and coffee. The chain primarily operates in urban office buildings, universities, transit centers, malls and museums.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Shaich, who helped revolutionize the restaurant business while making Panera Bread one of the largest chains in the country, is stepping down as its CEO, the company announced on Wednesday. 

Blaine Hurst, a six-year company veteran and its president, has assumed the role of CEO.

Shaich will step down effective Jan. 1 to “better allocate his time” between Panera, the company’s new owner, JAB Holdings, and his personal investments. He will remain Panera’s chairman and will be “a significant investor in the company.”

His departure comes months after JAB acquired Panera in a $7.5 billion deal.

The announcement came as Panera also said it has a deal to acquire Au Bon Pain, the Boston-based chain that Shaich helped found, and which was ultimately used as a vehicle to buy the chain that later became Panera.

The 2,000-unit Panera was among the most successful early fast casual restaurants that promised better food in a limited-service concept. The success of Panera, along with Chipotle Mexican Grill Inc. and others, helped push existing chains to improve their offerings, remodel stores and increase their competitiveness. They also helped lead to an unprecedented rush of investment into the restaurant space and other fast-casual chains. 

“This is the right time for me to step down as CEO while still staying involved in the business as chairman,” Shaich said in a statement. “I returned in 2011 because our growth was slowing and we needed to reposition Panera as a better competitive alternative with expanded growth opportunities. And I’m happy to say we’ve done that.” 

Panera operates more than 2,000 locations, and under Shaich the company undertook a costly and controversial strategy adding digital technology, including self-order kiosks, into its restaurants. The “Panera 2.0” strategy was credited with helping revitalize the chain’s sales in recent quarters. 

“The themes we bet on and executed successfully over the last half decade — digital, clean food, loyalty, delivery and new formats for growth — are shaping the restaurant industry today,” Shaich said.

Hurst, meanwhile, joined Panera in January 2011 as senior vice president of technology and transformation and was charged with guiding Panera 2.0 and its e-commerce platform.

He was promoted through the ranks and was named president in December. He had previously worked with Papa John’s International Inc., among others.

“Blaine has been a key player in our efforts to transform Panera during the past half-decade,” Shaich said. “He is very well known and respected in our organization and in our industry for his innovative thinking, technological savvy and ability to drive change.”

Shaich said in a release that Panera in its most recent quarter outperformed restaurant same-store sales by more than 800 basis points, versus the Black Box Intelligence monthly restaurant index.

“The past seven years have given me the opportunity to learn from an industry icon,” Hurst said in a statement. “And I have been fortunate to lead and be a part of many of the initiatives that are now driving Panera’s success.”

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

This post is part of the On the Margin blog.

Dave Olson thinks a lot of the Taco Bell system. 

“I love the brand,” he said in an interview. “Taco Bell is a great brand. It’s on top of its game, from a food innovation standpoint, to its programming, to the way it’s handling social media. It’s had an incredible run.”

And yet, Olson said this after selling all 57 of his Taco Bell locations to Pacific Bells, a Taco Bell operator based in Vancouver, Wash.

For him, the decision was a matter of timing. Prices for Taco Bell locations are ridiculously high — no system fetches prices quite as high as the fast food Mexican chain. Olson, meanwhile, is 60, so he’s nearing retirement.

And the regulatory environment is getting too challenging, particularly in California, where Olson operated his locations.

“It takes the fun away from it,” Olson said. “Now you’re just waiting for them to pass more laws or put more laws on the books.”

Olson’s decision to sell is indicative of the decisions many operators of legacy brands are making around the country.

The industry is quietly going through a massive overhaul of the people responsible for running restaurants in chains like Taco Bell, The Wendy’s Co., Burger King, McDonald’s Corp. and many others.

Older, legacy franchisees are selling to larger or newer operators or both, as operating restaurants grows more difficult, brands drive changes and people simply age and opt to slow down. 

Many of these legacy brands grew in the 1970s and 1980s, attracting operators who grew along with them. But these operators are near retirement age, and so they’re opting to sell.

In recent years, the restaurant business has grown more complex. It costs more to operate a restaurant than it once did. Just as operators emerged from years of higher commodity costs, labor costs are now increasing.

Minimum wages are rising in many areas, driving up costs, and in some places franchisees like Olson are growing weary of the regulatory environment. 

In some instances, franchisees feel unable or unwilling to spend the money on remodels or other improvements that many brands are demanding in a competitive environment — most major franchise systems are currently demanding remodels. 

At McDonald’s Corp., some franchisees are opting to leave the system amid the chain’s requirements that they invest in things like kiosks and new espresso machines, as well as changing performance requirements.

“As you put together a performance expectation along with an investment expectation, we are seeing some owner-operators decide now is a good time to exit the system,” Chris Kempczinski, president of McDonald’s USA, said on that company’s earnings call last month.

As complex as the business is, however, there are plenty of buyers eager to snap up these restaurants. That includes larger franchisees eager to grow larger, often fueled by private equity firms that have found a desirable investment target in the cash flow from franchise operations.

“We see a fair amount of people kicking the tires on franchisee opportunities in the restaurant space,” said Chris Sciortino, managing director with Robert W Baird & Co. 

And lenders are willing to loan money to these buyers are attractive rates, which is enabling them to bid up the price on some of these acquisitions. 

As such, prices for franchisees in many brands — notably Taco Bell, but also Wendy’s and others — remain historically high. And so operators like Dave Olson who are nearing retirement and are growing frustrated by the business find the market too attractive not to get out.

All of it is contributing to an environment in which the franchisee base is changing rapidly and growing larger. And private equity investors keep putting money into the businesses. 

Some franchisors are aggressively dealing with these changeovers by working to direct stores into the hands of certain franchisees. In many cases the franchisors are tying the deals to remodel or development requirements.

“We have a long-tenured franchise system,” Wendy’s CEO Todd Penegor said on the company’s third-quarter earnings call this week. His company is buying many of these franchisees out and reselling those to its preferred operators, which it calls “Buy & Flip.” The company expects to do about 500 to 550 of these this year.

Ultimately, this is part of a natural evolution of a franchise system. But the trend is fueling considerable change at many of these chains, even if most people can’t see it. 

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Beekman Investment Partners III LP has made a majority investment in Another Broken Egg of America LLC, the companies said Monday.

The New York-based private equity firm said Chris Artinian, Beekman managing director, would assume of the role of president, a position previously held by concept founder Ron Green. Terms of the deal were not disclosed.

Beekman recently partnered with Artinian, who earlier served as president and CEO of Morton’s The Steakhouse, Smokey Bones Bar & Fire Grill and TooJay’s Deli-Bakery-Restaurant.

Miramar Beach, Fla.-based Another Broken Egg Cafe has 65 full-service restaurants that feature breakfast classics, cocktails and other specialties from 7 a.m. to 2 p.m. daily.

“Another Broken Egg Cafe is a modern and on-trend restaurant concept with a distinctive menu and friendly service,” said Artinian in a statement. “We are excited to partner with the talented management team at Another Broken Egg to build on the company’s legacy and accelerate growth.”

Beekman also holds interests in Oklahoma City-based Ted’s Café Escondido, which has 13 units in Kansas, Missouri and Oklahoma, and Tuckahoe, N.Y.-based TBG Food Acquisition Corp., which franchises Dunkin’ Donuts in the New York, South Carolina and Virginia markets.

“Another Broken Egg is a winning franchisor model and positioned as one of the leading daytime restaurant concepts in the quickly growing upscale breakfast category,” Artinian said. “We look forward to working with franchise partners as we continue to innovate the brand and grow our market presence.” 

Another Broken Egg was founded in 2000 and was a Nation’s Restaurant News “Next 20” brand in 2016.

“This is an exciting time in our company’s evolution, and a fantastic opportunity to capitalize on strong momentum in the daytime restaurant category,” Green said in a press release. “We believe Beekman is the right partner to help us significantly expand our store base, build on our rich heritage and reaffirm our reputation as a leading 'better breakfast' restaurant brand.”

Another Broken Egg’s latest franchise disclosure document said average annual sales for 49 franchised stores open a full 12 months as of the end of December 2016 was $1.32 million, down 1.4 percent from an average of $1.34 million for the 39 franchised restaurants opened for 12 months as of December 2015.

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

This post is part of the On the Margin blog. 

Last year, the activist investor Marcato Capital Management began buying up stock in Buffalo Wild Wings Inc., after the stock fell from more than $200 a share to below $150. 

The investor nominated four people to the company’s board, and won seats for three of them. Longtime CEO Sally Smith decided to retire, and the stock plunged, to under $100 a share at one point. 

Enter Roark Capital, which according to reports on Monday bid $150 per share for the Minneapolis-based chicken wing chain, or about $2.3 billion.

The stock has responded: It’s up more than 25 percent on Tuesday, getting awfully close to that $150 price Roark would apparently pay.

Still, that price seems low.

Sure, the price is about 28 percent over where it was just yesterday, and 50 percent above the company’s low this year. And casual dining chains generally fetch lower prices than do quick-service restaurants or fast-casual chains. Oh, and there is considerable uncertainty with the company, given Smith’s retirement and persistent sales problems.

But it’s still a modest return given where the stock was just last December — when it hit a 52-week high of $175 a share. 

Consider this: Marcato paid an average price of about $143 for its Buffalo Wild Wings stock. So $150 is only about 5 percent more — not exactly the type of return that activist investors demand.

Buffalo Wild Wings was not that long ago considered one of the best stocks on Wall Street. The chain had a long string of same-store sales increases, encouraged customers to linger over beer by watching sports and was generally the best-performing name in casual dining.

That at one point drove the stock to more than $200 a share and a valuation on par with companies like Panera Bread Co.

Now it’s being offered a takeout at a valuation multiple of less than 10 times earnings before interest, taxes, depreciation and amortization, or EBITDA. Panera was sold at a multiple of more than 18.

Indeed, Maxim Group Analyst Stephen Anderson, who has a Buy rating on Buffalo Wild Wings stock and a $160 price target, said there is “potential for a competing bid above the $150 level.”

He believes that Smith has laid the groundwork for improved margins and same-store sales growth. Last month, Buffalo Wild Wings stock soared after the company easily bested earnings projections. 

Peter Saleh, analyst with BTIG, said that the lack of much return for Marcato could complicate any deal, but he believes lack of progress on a new CEO could lead the activist to agree to a sale. 

Indeed, Stifel Analyst Chris O’Cull believes that Buffalo Wild Wings could be a “willing seller” given the CEO transition and the challenges in getting back to same-store sales growth.

We don’t doubt that Buffalo Wild Wings would be a willing seller. The company could likely view a go-private deal as an opportunity to make needed improvements out of the limelight. 

And Roark has succeeded with many of its investments. Among other chains, it has acquired Arby’s Restaurant Group, Hardee’s and Carl’s Jr. owner CKE Restaurants and Jimmy John’s. There’s little doubt the private equity group could find a quality CEO to get Buffalo Wild Wings back on its feet.

But we believe that other potential buyers could come in and offer more.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

MTY Food Group Inc., owner of Kahala Brands, has agreed to acquire the parent of The Counter and Built Custom Burgers brands, the Montreal-based company said Tuesday.

Terms of MTY’s planned acquisition of The Counter’s Culver City, Calif.-based parent, CB Franchise Systems LLC, were not disclosed.

“Since the acquisition of Kahala Brands in July 2016, MTY has been seeking potential additions to its strong portfolio of brands,” said Stanley Ma, MTY CEO and chairman, in a statement. “The Counter and Built fit that perfectly.”

The Counter and Built Custom Burgers have 41 franchised locations and three corporate-owned locations. Of those 44 restaurants, 34 are in the U.S., one is in Canada and nine are in other countries.

MTY said over the last 12 months, the combined Counter and Built networks generated more than $81 million in sales systemwide.

The company said the deal will be financed with cash on hand and through existing credit facilities.

MTY bought multibrand franchisor Kahala Corp. in May 2016 in a cash-and-stock deal valued at $300 million. That added such brands as Blimpie, Cold Stone Creamery, Frullati Café & Bakery, Planet Smoothie, Pinkberry and Tasti D-Lite to MTY’s portfolio. 

In September 2016, MTY expanded its brands by buying BF Acquisition Holdings LLC, owner of Baja Fresh Mexican Grill and La Salsa Fresh Mexican Grill, for $27 million.

Currently, MTY operates about 60 brands across various segments in the U.S., Canada and abroad.

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

This post is part of the On the Margin blog.

In 2012, a Luxembourg-based investment firm known at the time as Joh A. Benckiser acquired Peet’s Coffee & Tea for an acquisition multiple of about 20 times earnings before interest, taxes, depreciation and amortization.

Since then, the firm, now known as JAB Holding Co., has made a long series of acquisitions, generally of companies in the coffee and breakfast space.

JAB Holding has acquired Caribou Coffee, Intelligentsia Coffee & Tea, Einstein Noah Bagel Co., Stumptown Coffee Roasters, Krispy Kreme Doughnuts Inc., Bruegger’s Bagels, Panera Bread Co., and, just for the heck of it, Au Bon Pain. Oh, and amid this spree, it acquired the single-serve coffee company Keurig Green Mountain. 

JAB Holding paid remarkably high prices for these companies. In addition to the Peet’s multiple, it paid north of 18 times EBITDA for both Krispy Kreme and Panera Bread. As a result, the firm's presence has driven up prices for limited-service restaurant companies. If you want to acquire a limited-service chain with a good track record, expect to pay a multiple of at least 18. It’s rumored that the investment firm is now interested in Dunkin’ Brands Group Inc., which would fetch exactly that type of multiple.

JAB Holding is able to pay these prices because it has a long-term time horizon. The firm makes investments for the old-money European Reimann family, which is looking for income that can last decades, not years. The firm has its roots in a chemical company founded in Germany in the early 19^th century. For more about the family, read this Financial Times story about the Reimanns and their bold business moves.

Michael Phalen, managing director with retail investment banking at Wells Fargo, said at the Restaurant Finance & Development Conference this week that he asked JAB Holding representatives why they would pay a 20 multiple for Peet’s after that deal. “You could have had it for 15,” Phalen said. 

“They kind of chastised me,” he said. “You think in terms of multiples; we think in terms of dollars returned to the family over 20 years.”

Rather than buy something the company can flip in a few years, like most private-equity firms, JAB Holding wants to buy businesses that will provide the family with an income for a long time. When companies have a long-term time horizon and seemingly unlimited resources, multiples don’t matter.

The impact has been to drive up the prices on many of these deals. JAB Holding’s high prices, along with the large amount that Burger King owner Restaurant Brands International Inc. paid for Popeyes Louisiana Kitchen earlier this year, have helped drive up prices for large, limited-service chains.

“If people want to buy and consolidate large limited-service restaurant companies, the price is going to be somewhere between 18 and 22 times EBITDA,” Phalen said. “That’s clearly not for the faint of heart.”

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter: @jonathanmaze

Sodexo has announced the signing of an agreement to acquire Centerplate, a major provider of food and beverage, merchandise and hospitality services at sports facilities, convention centers and entertainment facilities in the United States, the United Kingdom, Canada and Spain, for $675 million from investment firm Olympus Partners, which had purchased the company five years ago. The acquisition is subject to customary regulatory approvals and is expected to be closed by the end of 2017.

Centerplate CEO Chris Verros will lead the new combined business in the United States while the company’s European operations will be integrated into Sodexo’s existing Sports & Leisure business in the region. 

Centerplate is the fourth largest operator by revenues in the United States Sports & Leisure market, the world’s largest, and annually hosts more than 116 million guests across its portfolio of venues for marquee events that have included 14 Super Bowls, 36 U.S. Presidential Inaugural Balls, All-Star and Championship games for professional football, baseball, basketball, hockey, soccer, collegiate athletics, and many of North America’s largest conventions.

Major sports facilities in the U.S. where Centerplate currently operates include Hard Rock Stadium in Miami, home of the NFL’s Miami Dolphins; Major League Baseball parks in Seattle (Safeco Field) and San Francisco (AT&T Park); NHL arenas in Miami (BB&T Center) and Winnipeg (Bell MTS Place); and the Smoothie King Center in New Orleans, home of the NBA’s New Orleans Pelicans. It also managed concessions at Tropicana Field in Tampa this past Major League Baseball season but the club reportedly recently transferred the contract to Levy Restaurants starting next year.

Convention center facilities where Centerplate operates include the Javits Center in New York, the Las Vegas Convention Center, the Nashville Convention Center, the Pasadena (Calif.) Convention Center and the Ernest M. Morial Convention Center in New Orleans.

Revenues for Centerplate’s last completed fiscal year, which ended in June, were $998 million. It placed No. 6 on the 2017 FM Top 50 Contract Management Companies listing.

Sodexo’s Fiscal Year 2016 revenues for the Sports & Leisure segment were 903 million euro (about $1.070 billion at the current conversion rate), so the deal would basically double the company’s business in these segments.

“This acquisition substantially strengthens Sodexo’s position in the North American market, and brings the Group’s Sports & Leisure business to scale in the region,” the company stated in a release announcing the deal. “In the UK, the acquisition supports Sodexo’s strategy to grow its stadia and cultural destination portfolio. The acquisition also positions Sodexo as a leading player in Sports & Leisure globally, more than doubling its footprint.” 

“This acquisition is another step in our long-term strategy to become a leading player in every market in which we are present,” added Pierre Henry, Vice-President of the Group Executive Committee and CEO Sports & Leisure Worldwide for Sodexo in the same release. “Centerplate is an ideal partner with highly professional, dedicated teams who bring a wealth of industry expertise. We look forward to working together with Centerplate to bring exceptional Quality of Life experiences to tens of thousands of fans and spectators around the world.”

"With Sodexo, we share the same vision to deliver a unique and memorable service for our clients and guests through our tailored food and beverage programs, unique hospitality design, rewarding event and retail services,” noted Veros. “Centerplate’s clients will benefit from Sodexo’s global capabilities, solution innovations, other on site services and geographic reach.”

FAT Brands Inc., parent of the Fatburger fast-casual brand, has agreed to acquire casual-dining Hurricane Grill & Wings for $12.5 million, the companies said Wednesday.

Los Angeles-based FAT Brands, which recently went public and agreed to acquire Ponderosa and Bonanza steak chain parent Homestyle Dining LLC, said West Palm Beach, Fla.-based Hurricane Wings & Grill offers a broad consumer base. It has more than 60 units in eight states.

“We see Hurricanes as a wonderful complement to our Buffalo’s Cafe and Buffalo’s Express brands,” said Andy Wiederhorn, FAT Brands president and CEO, in a statement, “and look forward to expanding the brand’s footprint in both new and existing markets through our extensive franchisee network.” 

Wiederhorn said Hurricane Grill has a new fast-casual brand, Hurricane BTW, that specializes in burgers, tacos and wings. With that brand’s “significant development pipeline,” he said the company would diversify into more fast-casual venues. 

John Metz, Hurricane Grill president and CEO, said: “Joining the FAT Brands Inc. family will make Hurricane Grill & Wings and Hurricane BTW significantly more competitive in today’s landscape. We believe that this transaction will enable us to leverage FAT Brands’ proven expertise and realize our global growth potential.” 

FAT Brands said it would fund the acquisition with cash on hand and third-party financing. The deal is expected to close before year’s end.

FAT Brands said the combined company’s franchisees will operate about 350 restaurants around the globe, with systemwide sales of more than $360 million.

Fat Brands Inc. on Oct. 23 completed its $24 million, Regulation A+ IPO and started trading publicly, making it the first restaurant company to go public using new rules enabling small companies to raise money from investors. The IPO gave the company a valuation of $120 million.

In September, FAT Brands Inc. agreed to acquire Homestyle Dining LLC, the owner of the Ponderosa and Bonanza steak chains. The company agreed to pay $10.5 million for Homestyle.

Wiederhorn, through his Fog Cutter Capital Group Inc., acquired Fatburger in 2003 and Buffalo’s Cafe in 2011. The company since created a limited-service version, Buffalo’s Express, which is now cobranded inside Fatburgers.

FAT Burger said Hurricane’s would complement its Buffalo’s Cafe brand and give them a combined 75 restaurants. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless

Declining same-store sales and traffic, and growing fears of an upcoming recession, have not scared off investors in restaurant concepts and franchisees, bidding up the prices for companies well past historical norms.

That, at least, was the general sentiment among attendees at this week’s Restaurant Finance & Development Conference in Las Vegas.

Speaker after speaker described a financing and acquisition environment in which buyers outnumber sellers, including private equity groups, strategic buyers and family offices. That’s driven up prices for some concepts to historically high levels. 

“I haven’t seen an environment like this in many years,” said Chad Spaulding, managing director with industry investor Capital Spring. “There’s a tremendous amount of institutional and private cash flow chasing restaurant assets.”

Lending for these acquisitions, meanwhile, is flourishing, fueling much of the activity as the buyers can get relatively low rates from banks to make these acquisitions.

“The industry has been growing for eight years,” said Nick Cole, head of the restaurant finance division at Wells Fargo. “Supply has gotten out ahead of demand. The economy is showing signs of a recession. It’s already the third-longest expansion in history. If you’re a lender and thinking of a new five- to seven-year loan commitment, you might be thinking prospects in the future might not be healthy. 

“Apparently, if you said that you’d be firing up the loan engine right now, you’d be right. Capital is still pouring into this industry.”

Sales of restaurant companies have been numerous this year. Just this week, for instance, the Canadian company MTY Food Group acquired the burger company The Counter, while the private equity firm TPG Capital acquired Mendocino Farms. And Roark Capital submitted a bid to buy Buffalo Wild Wings Inc.

The contrast between the restaurant industry deal flow and industry traffic was not lost on many experts. 

Same-store traffic has fallen 27 of the past 29 months, according to the monthly restaurant index MillerPulse.

“There’s an interesting dichotomy,” said Damon Chandik, who leads restaurant investment banking at Piper Jaffray. “There are real pressures on the industry side.” He cited lower expectations for revenue growth, rising labor costs and concern about commodity increases.

“On the flip side, there are unprecedented flows of capital into the sector,” he said. “A lot of capital is looking for returns.”

To be sure, the weak industry numbers are driving buyers away from some companies.

A few publicly traded companies, such as Bravo Brio Restaurant Group Inc. and Fiesta Restaurant Group, have explored strategic alternatives that ultimately did not yield any sale recommendation. Casual-dining operator Ignite Restaurant Group had to file for bankruptcy protection and get debt off its books, and close some stores, before buyers were willing to acquire that company.

“There’s more punishment of brands that have fallen out of favor,” said Dan Collins, principal with restaurant merger & acquisition firm The Cypress Group.

Still, the industry is luring more companies eager to buy. The reason is simple: Problems in other consumer sectors are worse. Retailers are shutting locations. The grocery business is facing major competitive pressure from Amazon and other companies. And internet-based companies represent a major threat in the hospitality world.

In addition, strategic buyers are more interested in making acquisitions — such as Darden Restaurants Inc.’s spring purchase of Cheddar’s Scratch Kitchen.

The restaurant space remains one with potential for growth, while outside competitive threats are not as significant as they are in other industries.

“If someone wants to invest in the consumer space,” Chandik said, “they’re running out of options.”

Said Michael Phalen, managing director with Wells Fargo: “We are still the most beautiful belle at the ball.”

But the weak traffic environment coupled with interest in acquisitions from buyers has created a rare event: Valuations for private companies are higher than are valuations for publicly traded companies.

Restaurant stocks, particularly for small cap companies, have fallen this year. The valuation for Buffalo Wild Wings fell enough for Roark to bid a $2.3 billion price that would represent a 28 percent premium over its previous trading price and still represent a valuation multiple of less than 10 times EBITDA — earnings before interest, taxes, depreciation and amortization.

“It’s flipping, where public companies are trading at lower valuations than where private companies trade,” Chandik said. That’s usually reversed: Public company investors traditionally pay higher prices than do private investors.

As such, the market for restaurant industry initial public offerings has dried up, because sellers can get higher prices from private equity groups. 

The general sense among attendees is that the period of heavy merger and acquisition activity will soon come to an end. The growing potential for a recession could well slow it down. So, too, could higher interest rates that drive up the cost of lending. 

So restaurant owners looking to sell could consider heading to the exits sooner, rather than later. 

“If you’ve got a couple of things you’re itching to sell, now is the time to do it,” Spaulding said. 

Contact Jonathan Maze at jonathan.maze@penton.com

Follow him on Twitter at @jonathanmaze

Premier Restaurant Group, owner of Forever Yogurt, has acquired the 31-unit Cheeburger Cheeburger brand, the company said Wednesday.

Wilmington, Del.-based PRG, which acquired the 28-unit Forever Yogurt in July 2016, said it intends to expand the burger concept with a new fast-casual format. 

PRG did not disclose the terms of the deal with Fort Myers, Fla.-based Cheeburger Cheeburger Restaurants Inc.

“Cheeburger is a great acquisition for PRG and allows us to fully leverage the knowledge of my experienced and skilled team,” said Anthony Wedo, PRG founder and CEO, in a statement. 

Cheeburger Cheeburger was founded in 1986 in Sanibel Island, Fla., and was an early pioneer in the better-burger segment. The concept, which also offers milk shakes, has a name that links to a John Belushi sketch on “Saturday Night Live” in the 1970s about a fictional Greek-owned restaurant called Olympia Cafe that the writer said was based on the Billy Goat Tavern in Chicago.

“Tony is a visionary leader who is expanding the brand into new formats,” said Rob Crews, PRG chief concept officer. “We have already developed and approved a fast-casual prototype that several franchisees have committed to opening within the next six months.”

Cheeburger Cheeburger has traditional and airport units in 12 states and one each in Canada and Saudi Arabia. 

Contact Ron Ruggless at Ronald.Ruggless@Penton.com

Follow him on Twitter: @RonRuggless 

Yo! Sushi, a London-based conveyor-belt sushi chain owned by investment firm Mayfair Equity Partners, has purchased Bento Sushi, North America’s second largest sushi company, for CA$100 million, around $78 million, the companies said Monday. 

As part of the agreement, Bento Sushi founder and chairman Ken Valvur and CEO Glenn Brown will join Yo! Sushi’s board “and become significant shareholders in the combined group,” a press release announcing the merger said. 

Bento Sushi operates more than 600 locations, mostly in Canada but with some in the United States, in various formats, including quick-service restaurants and kiosks in supermarkets. It also supplies sushi to an additional 1,700 sites, including supermarkets and non-commercial operations.

The largest North American sushi company, Advanced Fish Concepts, franchises more than 4,000 counter-service sushi locations in North America and Australia.

Yo! Sushi operates 81 locations and franchises an additional 16. Most of its restaurants are in the United Kingdom, but it also operates in the United States, continental Europe, the Middle East and Australia. Within the past 18 months it opened its first locations in New York City, Paris and Sydney. 

Yo! Sushi CEO Robin Rowland said: “This acquisition takes Yo! into the next stage of its development and creates the first global multi-channel Japanese food purveyor. Bento’s proposition and its management team’s strong track record make it the ideal partner for Yo! as we look to further grow our brand. 

Brown and Valvur both said the purchase of their company provided opportunity for expansion.

“This partnership presents Bento with an incredible opportunity to grow its platform,” Brown said. “Yo! and Bento share a similar ethos and history, and we look forward to working with the Yo! team and taking advantage of opportunities to develop both brands.

Bento Sushi was founded in 1996 and Yo! Sushi was founded in 1997. In their corporate messaging, both companies emphasize the importance of sustainable seafood.

“The combination of Yo! and Bento will further enhance our group’s ability to be the partner of choice for grocery and institutional food service providers throughout our enlarged operating geography, and creates exciting opportunities for our valued team members on both sides of the Atlantic,” Valvur said.

Mayfair Equity Partners also are investors in Ovo Energy, Fox International, Tour Partner Group, Talon Outdoor, SuperAwesome and Promise Gluten Free.

Contact Bret Thorn at bret.thorn@penton.com

Follow him on Twitter: @foodwriterdiary

PVR Ltd., India’s largest movie theater company, has acquired a minority stake in U.S. restaurant and movie chain iPic Gold Class Entertainment Inc., the company said Monday.

The deal comes as iPic, based in Boca Raton, Fla., is planning a small, Regulation A+ initial public offering that will allow the company to sell stock to its customers and the general public.

The company operates 16 locations, with 10 restaurants and 121 screens in 10 states. The company’s facilities include a polished casual restaurant, a full-service bar and a luxury theater.

Terms of the investment were not disclosed.

As part of the investment, PVR Chairman and Managing Director Ajay Bijli will get a seat on iPic’s board.

The company has said it wants to raise up to $30 million in a Regulation A+ initial public offering, also known as a “mini IPO,” which enables smaller companies to raise funds from smaller investors, including their own customers. Fatburger owner Fat Brands Inc. completed a similar IPO last month.

The company gets 51 percent of its revenues from food and beverage sales and 31 percent from its theater, and 18 percent from things like memberships and sponsorships.

Revenue between 2010 and 2016 has grown by 22 percent per year, according to the company’s IPO listing on the banq.co website, which is handling the offering.

Contact Jonathan Maze at jonathan.maze@penton.com 

Follow him on Twitter: @jonathanmaze

Correction, Nov. 20, 2017: A previous version of this story incorrectly stated the nature of the investment.

Jack in the Box Inc. is closing in on the sale of the Qdoba Mexican Eats brand to Apollo Global Management LLC for a price tag of more than $300 million, industry sources confirmed to NRN on Monday.

The would-be buyer is the parent company of CEC Entertainment Inc., which owns the Chuck E. Cheese dining and arcade concept. Despite this, there are no potential plans to integrate the two brands, the sources said.

The sources, who wish to remain anonymous due to the confidential nature of the deal, indicate that the sale is not yet final and could still fail to materialize.

Should it go through, the deal may be reported as early as next week.

Last week, Reuters also cited an anonymous source that the deal was in the works. 

Both Jack in the Box and Apollo declined to provide comment.

Chris O’Cull, managing director of equity research at Stifel Financial Corp., told NRN that the potential sale is likely more of a reflection of the current industry climate than an indictment on Qdoba’s potential itself.

“The quick-casual segment has become more competitive because of the number of restaurant concepts that have been created the past several years,” said O’Cull, noting that he is not bearish on the Mexican quick casual segment specifically. 

“If anything, it’s probably just an oversupply of quick casual right now that has made it difficult for older quick-casual brands to grow.”

He also noted that Jack in the Box may potentially want to focus on just one brand.

San Diego-based Jack in the Box announced that it had hired Morgan Stanley & Co LLC to evaluate alternatives for the Qdoba brand during the company’s second quarter earnings call in May.

Sources indicate that the decision to sell Qdoba came about because the concept didn’t fit in with flagship Jack in the Box’s heavily-franchised business model, as CEO Lenny Comma said was in consideration this spring.

“At our investor meeting last May, we said one of the factors that would cause us to reconsider our strategy with respect to Qdoba was valuation,” Comma said in the second quarter earnings release.

“It has become more apparent since then that the overall valuation of the company is being impacted by having two different business models.”

Qdoba ended that quarter with a 3.2 percent drop in same-store performance, highlighted by a 5.9 percent slide at company-owned locations.

The brand regained positive same-store traction in the third quarter ended Jul 9 with a slight increase of 0.5 percent but saw a 1.1 percent dip in the comp performance of company-owned restaurants.

Jack in the Box is scheduled to report its earnings results for the fourth quarter ended October 1 on Wednesday, Nov. 29 after market close.

Jack in the Box has more than 2,200 restaurants spread across 21 states and Guam. Currently, it fields more than 700 Qdoba restaurants across 47 states, Washington D.C. and Canada.

Contact Dan Orlando at Dan.Orlando@penton.com 

Follow him on Twitter: @DanAMX