Extending the Platform
Flynn and Pettinger handed off the World Wrapps restaurants and committed themselves to becoming a lead expert in running Applebee’s stores.
Flynn Restaurant Group did just that, growing to more than 400 in the next decade.
By 2011, Flynn felt the company had the requisite capital, experience, and industry knowledge to become a multi-brand platform. When deciding what chains to pursue, the organization listened to the marketplace and decided to model itself after the composition of the restaurant industry, which at the time was 60–70 percent fast food and 20–25 percent full service, Flynn says. The rest was filled by the small, but growing fast-casual space.
“The idea there is, we could guess at which segment is going to be the winner in the long run,” Flynn says. “But that’s hard to do and it comes and goes and it’s just that the safest bet is to diversify along the lines of what the market is saying to you. And that may change over time.”
The other key factor dated back to Flynn Restaurant Group’s origin—only associating with mature, proven brands that have been around for decades.
The company entered fast food through Taco Bell in 2012, and now operates 280 restaurants in nine states. For fast casual, the only true options, Flynn says, were Chipotle and Panera. Since Flynn Restaurant Group already operated Taco Bell and Chipotle didn’t franchise, Panera became the No. 1 option. The operation was established in 2014, and now includes 133 bakery-cafes in eight states.
“It took a while to actually get into the Panera system,” Flynn says. “Panera hadn’t had a new franchisee in 10 years at the time we finally entered, and it took getting to know [founder] Ron Shaich personally and convincing him that we would be good for the brand.”
Flynn Restaurant Group followed that up in 2018 with Arby’s, through an acquisition of nearly 370 restaurants in nine states. At this stage, the company had the quick-service presence it desired, but it was still outside two major sub-segments—burgers and pizza.
That is until NPC, a franchisee of more than 1,200 Pizza Hut and 390 Wendy’s restaurants, entered the fray. Hampered by COVID and steady declines in its Pizza Hut business, the franchisee declared bankruptcy in July 2020 and looked to facilitate a sale.
“We had to get comfortable that Pizza Hut as a brand was in a good place, going in a good direction, and we got very comfortable with that,” Flynn says. “All brands have good times and bad times in our experience, and Pizza Hut had a few really rough years. It’s one of the things that created the opportunity for us to buy NPC.”
Before the sale agreement, NPC shut down its worst 300 units, which Flynn calls “every restaurateur’s dream.” The 390 Wendy’s units were divided among Flynn Restaurant Group and a collection of Wendy’s franchisees.
The transaction closed March 2021. On a trailing 12-month basis, Flynn says both divisions have experienced record years.
“The portfolio that we bought was pristine,” Flynn says. “I mean there were almost no losers in it. The question was, was it going to stay that strong after COVID was over or once it subsided a little bit. Our view was that strength was actually going to continue. And we’ve seen it continue for the subsequent year after that transaction. Both are going to perform at about the same level, or a little bit better, post-COVID than they performed in ’20, which is to say very strong and right to our plan.”