Roark Capital apparently has no plans to rest on its laurels once the merger of Arby’s Restaurant Group and Buffalo Wild Wings is complete.
The Atlanta-based private-equity group is looking to acquire other brands that it could group with the sandwich concept and the chicken wing chain, according to a report on the website Axios. The site says that the name of the group would be Inspiring Restaurant Brands.
Roark would then take the entire thing public.
A spokesman for Arby’s would not comment on the report. But it’s a good bet that Roark would perform some sort of brand combination simply given the investor’s history: Roark likes to buy up restaurant brands and has combined its acquisitions in the past.
Roark has acquired an extraordinary number of chains over the years and is now one of the most powerful forces in the industry. In its early history, the investor bought up brands like Moe’s Southwest Grill, Auntie Anne’s and Cinnabon and put them in a single group called Focus Brands.
The serial acquirer, in fact, has a handful of brands that could work alongside Arby’s and Buffalo Wild Wings—such as Hardee’s and Carl’s Jr. owner CKE Restaurants Inc. But the investor could find plenty of opportunities on the fix-it market at relatively low prices.
Roark is raising $5 billion for its fifth fund, according to SEC filings, which would give the investor ample ammunition to buy another concept.
What’s more, the investor appears to be agnostic about the type of brand to acquire. Traditionally, companies that put together multibrand operators tend to group them by service type. So Yum Brands Inc. generally operates limited-service franchises, while Darden Restaurants Inc. and Bloomin’ Brands Inc. operate casual-dining restaurants.
Yet Arby’s is a fast-food chain, while Buffalo Wild Wings is a casual-dining concept. That means Roark could target just about anyone that comes to market.
For instance, it could buy a company like Cheesecake Factory, whose stock has fallen more than 21% in the past year and could be acquired for a price similar to the $2.4 billion being paid for Buffalo Wild Wings.
Or it could take private Habit Restaurants Inc. at a much lower price. Habit has a market cap of just more than $250 million and has fallen more than 40% over the past year.
While restaurant stocks are up more than 20% this year, according to the S&P 500 Restaurant Index, many smaller cap names, particularly among casual-dining chains and some fast-casual concepts, have seen their stock prices plunge over that time.
Private investors have thus far been reluctant to take on companies perceived to be struggling, even as they buy just about everything else not bolted to the floor at sometimes record multiples. Several companies have tried, and failed, to find buyers this year, even at depressed prices.
Roark’s acquisition of Buffalo Wild Wings, and word that it might now look at turnaround targets, could signal a shift in that thinking.
After all, investors make their money when they buy low. And there are plenty of restaurant companies that could be had at bargain prices.