Shopping (and selling) tips from dealmaking pros

A Murderer’s Row of industry dealmakers took the stage at the Restaurant Leadership Conference to air their widely different approaches to finding and profiting from restaurant acquisitions.

The four panelists walked the audience through every step of the process, from what makes a good acquisition to what changes they make after buying a concept and what potentially can go wrong.

They also spoke about their plans for specific recent acquisitions, including Arby’s, Corner Bakery and California Pizza Kitchen.

Here are some of the insights that were provided by the panel, which consisted of Rahul Aggarwal, managing director of Brentwood Associates; Josh Olshansky, managing director, Golden Gate Capital; Steve Romaniello, managing director, Roark Capital; and Andrew Taub, partner, Catterton Partners. The session was moderated by Bill Krausse, managing director of GE Capital, Franchise Finance.

What makes a good acquisition
“The two key components we look at are real estate and the brand. Because if they’re not right it’s going to be expensive to fix.” -Golden Gate’s Olshansky.

“The first thing we look at is unit economics. How fast can a new unit pay back?” -Catterton’s Taub

“It’s more personal to us. So we really have to be aligned to management.” -Roark’s Romaniello (who’s also chairman of the private-equity company’s restaurant-operating arm, Focus Brands)

What they value in a target’s management
“Passion for the business is really important. Seeing how they interact with their employees when they walk the floor can be very telling…It says a lot for a leader when they hire people who have skill sets they don’t have.” -Brentwood’s Aggarwal

“We want to find companies that we really like, led by people that we really like. And we buy them So we’ve never had to make a management change.” -Romaniello

Typical changes made post-acquisition
“A much more metric-driven approach to managing the business [is implemented.] You can measure guest satisfaction, labor productivity, you can manage food waste.” -Olshansky

“We get very involved in things like real estate investment, what markets you enter, purchasing…” -Taub

What can go wrong
“Putting too much debt on a company. [Also,] basing a price on an assumption that doesn’t work out.” -Romaniello

“One of the things we worry about is the balance against the guest experiences of the efficiency and the profitability of the business.” -Olshansky

What Obamacare will mean to private-equity owners
“You’re going to see a lot of people playing games with hours. You’re going to see a lot of people get a whole lot of less hours. I think it’s going to be very cumbersome from a compliance standpoint.” -Romaniello

“The conclusion I’ve come to is, very rare is the concept that can absorb that cost without passing it on to the consumer. What result that’s going to have on traffic and on other eating options remains to be seen.” -Taub

Today's top stories

1
1. Keep a “cemetery portfolio.” Just because an idea doesn’t wow you the first time doesn’t mean it needs to die. One R&D chef mentioned that he compiles what he calls a “cemetery portfolio,” a...
2
Shares of burger chain Shake Shack Inc. SHAK, +1.47% hit a record of $89.55 early Thursday, after a report that the company is mulling opening a "chicken shack". CNBC reported that a unit of the...
3
What CMO doesn't have millennial burnout? Tailoring the perfect marketing messages to today's young adults seems like it's been the marketing holy grail for years. The good news is that brands can...
4
The Frisch’s family restaurant chain said it has agreed to be acquired by the private-equity fund NRD Partners I for $175 million, or $34 per share. Frisch’s operates 95 restaurants and has...
5
The Culinary Institute of America has named Fernando Salazar managing director of the school’s San Antonio campus, effective June 1. Salazar, formerly vice president of food and beverage for Wyndham...
6
The Restaurant Opportunities Center said it has filed a resolution as a shareholder of McDonald’s that would force the franchisor to stop paying dues and providing any lobbying support to the...
7
Menu insight of the day, powered by Food Genius , provides daily restaurant menu data to help restaurant operators build better menus. Food Genius is a restaurant menu insight provider that collects...
8
Don’t take our word that you missed a chance to get much smarter about the restaurant business if you sat out this year’s National Restaurant Association Show. Here are some head-turning utterances...
9
McDonald's Corp (MCD.N) shareholders on Thursday approved a proposal that would make it easier to nominate directors to the board of the fast-food chain, which is in turnaround mode after losing...
10
Olive Garden got a scathing lecture from shareholder Starboard Value last year on the restaurant chain’s failings, including its bloated menu and a lack of salt in pasta water. Now it’s time for...