Earlier this week, BBQ Holdings, the parent company of Famous Dave’s and Granite City, said it is on the hunt for more acquisitions even though the ink was barely dry on its purchase of Village Inn and Bakers Square.
Of course it is. This is 2021. Maybe not everybody is “on the hunt” for an acquisition but plenty of them sure are.
Consider this: Recently we’ve seen JAB Holdings merge together Panera Bread with Einstein Bros. Bagels and Caribou Coffee into a single multi-brand operator—not the first time JAB did such a thing, either. Fast-casual chains Tender Greens and Tocaya Modern Mexican merged to form One Table Restaurant Brands.
SPB Hospitality, the parent company of a few chains including Logan’s Roadhouse and Old Chicago, bought a couple more in a deal for J. Alexander’s and its ancillary brands Redlands Grill and Stoney River.
Fat Brands, owner of Fatburger and Johnny Rockets among others, bought a bunch more concepts with the acquisition of Global Franchise Group. And CEO Andy Wiederhorn, who can’t drive past a lemonade stand without asking if it’s on the market, said he has other deals in the works.
That’s just in the past couple of months. Go back a bit further and of course you get deals like the massive Inspire Brands-Dunkin’ Brands deal.
The industry has been in a period of consolidation in recent years with the creation of companies like Inspire Brands and Restaurant Brands International. It took something of a break during the pandemic, though the proliferation of Chapter 11 filings did fuel some consolidation as buyers sought out opportunistic deals.
The push to combine one restaurant with another is all about technology. As digital sales became important, restaurant companies began to see the need to get more scale. That scale has enabled them to share some costs and get more buying power—while also helping them to be able to pay for things like online ordering that have become table stakes recently.
Other industries have been consolidating for years, including grocers, retailers and hotel companies, as those businesses prepared for the onslaught of changes brought on by the Internet and new competitors. Restaurants were naturally the next industry to take this step as changes came about from the growing demand for digital sales and the advent of third-party delivery that forced a shift in industry and consumer thinking.
The pandemic has only intensified the need for companies to think about technology. Digital sales at restaurants have soared over the past 18 months while third-party delivery in particular has taken off. And neither trend appears to be easing even as consumers start eating at restaurants.
That may well increase the need for companies to band together so they can better fund initiatives and be more competitive. Jason Maceda, president of Baskin-Robbins, told me recently that his chain was able to save a “significant amount of money” after Inspire consolidated its media buying—enabling Baskin to pay for more advertising.
There are other reasons companies are consolidating—the presence of so many chains at low prices, for instance. Whatever they are, the pandemic appears to have sped that up, like it has so many other trends.