2018 was the year restaurant brands decided it was better to be in a group than to go it alone.
Strategic buyers were out in full force this past year, acquiring additional brands in a bid to get bigger.
The trend was evident among big brands, beginning early this year when Arby’s bought Buffalo Wild Wings, creating the multi-brand concept Inspire Brands. And it was evident among small brands—such as Macaroni Grill’s purchase of Sullivan’s.
Such deals have become more popular for a variety of reasons.
First, growth is harder to come by in the restaurant space right now. Same-store sales have been stagnant for three years. New unit growth is more challenging. To match growth projections, companies have to make acquisitions.
The operating environment is also a challenge. Higher labor costs and the aforementioned sales challenges have put pressure on profits. By banding together, companies can share some overhead costs, which helps overall profitability.
There are also a lot of companies available—especially small to mid-sized companies that have seen problems in the past. Such companies can be had for relatively low prices, which many buyers believe to be an opportunity to grow larger. “We’re going to continue to see opportunities,” Nishant Machado, CEO of Macaroni Grill, said in an interview.
As such, most of the biggest deals in 2018 were of the strategic variety, as big companies grew bigger with acquisitions. Here’s a look at some of them.
Arby’s buys Buffalo Wild Wings
This early 2018 deal stands as the year’s biggest. Roark Capital-owned Arby’s bought the struggling casual-dining chain for $2.9 billion, in the process creating Inspire Brands, which made it clear from the get-go that it planned to quickly buy additional concepts.
Inspire Brands buys Sonic Corp.
Look at 2018 as sort of an Inspire sandwich. The year started off with the company’s formation, and concluded with the completion of its acquisition of Sonic for $2.3 billion.
Flynn Restaurant Group buys U.S. Beef Corp.
The big franchisee of Applebee’s, Taco Bell and Panera Bread added a fourth brand with the acquisition of 368 Arby’s locations from U.S. Beef Corp. Terms of that deal were not disclosed, but it was one of the largest franchisee deals in history.
Cava Grill buys Zoe’s Kitchen
This $300 million deal, engineered by former Panera Bread CEO Ron Shaich, created a Mediterranean fast-casual powerhouse.
Sweetgreen gets $200 million
This isn’t an acquisition like the other deals on this list. But this investment was huge, giving the quick-growing salad concept a massive $1 billion valuation. Not bad for a chain with just 90 locations.
Macaroni Grill buys Sullivan’s
This was a small deal, just $32 million. But it was one of a wave of such deals, in which the buyer was a formerly struggling concept looking to buy other struggling concepts. Mac Grill was in bankruptcy just last year. Other deals like this included Old Chicago owner Craftworks buying Logan’s Roadhouse, Shari’s Pies (very) quietly buying Coco’s and Carrows, and the $10 cash sale of Tilted Kilt. Oh, and High Bluff Capital bought Quiznos, then it bought Taco Del Mar, while Fatburger bought Hurricane Grill & Wings.
Coca-Cola buys Costa Coffee
OK, so Costa is a European chain. But this was one of the most interesting deals of the year, giving the big beverage maker a coffee brand and making it a more direct competitor with Starbucks and Dunkin’.
Cinnabon’s owner buys Jamba Juice
Focus Brands, Roark Capital’s legacy multi-brand concept that operates Cinnabon and Auntie Anne’s and Moe’s, took Jamba Juice private in a $200 million deal—creating immediate speculation that Focus would soon go public.
JAB buys Pret a Manger
Oh, you’d think this list wouldn’t include a JAB deal? It had a couple of deals this year, including the purchase of cookie delivery concept Insomnia Cookies by JAB’s Krispy Kreme. But the bigger one was the $2 billion sale of the British chain Pret, which had been planning on an IPO.
Rhone Capital buys Fogo
The April purchase of Fogo de Chao helped spur this period of take-private deals. Rhone bought the Brazilian steakhouse chain in a deal valued at $560 million.
More are coming
Several other companies are for sale. That includes Papa John’s, Papa Murphy’s and Jack in the Box. Bojangles also needs to complete its sale. PF Chang’s is looking for a buyer, as is Hooters.
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