Jimmy John’s deal had a unique twist to it simply because Roark bought a majority stake in 2016. At the time, the sandwich brand was valued at roughly $2.3 billion when Roark’s stake included a minority share in the brand owned by private-equity firm Weston Presidio.
By acquiring Jimmy John’s (for an undisclosed amount) the company essentially transferred the business from one Roark entity to another. The chain changed hands but ultimately remained under the control of Roark.
At the end of 2018, 2,748 of Jimmy John’s 2,803 restaurants were franchised. That likely appeals to Roark as well, which has investments in Carvel, Auntie Anne’s, and Carl’s Jr. The company led Wingstop Inc. to a public offering in 2015 after owning a majority for five years. It paid $200 million for Jamba in 2018 (now FOCUS Brands run).
Roark founder Neal Aronson co-founded US Franchise Systems, a hotel brands operator, before taking the private-equity route as well.
And just generally speaking, private equity and fast food have been on a tear in 2019, and the dynamic is ripe for Inspire to pounce. In the first nine months of the year, per PitchBook, private-equity deal value in the sector approached $5.35 billion. In all of 2012, it was just $3.17 billion.
Some experts have credited this surge for the industry’s current traffic problems. Restaurants, according to data cited by the WSJ, are growing at twice the rate of the population. Investors are partly to blame. Since the early 2000s, banks, private-equity firms, and other financial-backed powers have poured billions into the food industry. The reason being that restaurants are considered by many investors to be more tangible than dot-com start-ups. PE firms have also seen success in taking public restaurant companies private, as a rash of M&A activity recently suggests.
And just look at the capital difference three years makes as proof.
The consolidation of the industry is one way restaurants are guarding against the challenges afoot. Everything from rising labor costs to uncertain commodities to regulations. Smaller brands face added challenges in a rapidly moving industry, Christian Charnaux, Inspire’s chief growth explained to QSR previously. They often need to expand rapidly to satisfy customers’ needs, whether that be technology, convenience, accessibility, and so forth. A portfolio of concepts, however, can serve customers in multiple ways across multiple touchpoints if approached correctly. It also allows for forward thinking—testing, learning, and implementing tech on the consumer and operational front—instead of making day-to-day, bottom-line, survival-mode decisions.
Today, 10 companies control more than 50 restaurant brands (Brinker, Yum!, RBI, Bloomin’ Brands, Golden Gate Capital, Roark Capital, JAB, Darden, Jollibee Foods Corp, and Sun Capital).
Houston billionaire Tilman Fertitta’s Landry’s has been on a buying spree lately, scooping up Del Frisco’s Double Eagle Steakhouse and Grille and buying Restaurants Unlimited out of bankruptcy. So has L Catterton, which took over bartaco and Barcelona Wine Bar.