IPOs or Fat Brands: The year in restaurant mergers and acquisitions

The industry continued to consolidate in 2021, while restaurants returned to the public markets with surprising eagerness.
Photo illustration by RB Staff

The owners of restaurant chains looking to do a deal seemed to have two choices: Take money from public equity investors or from Andy Wiederhorn.

That’s not entirely true. But there have been five initial public offerings this year, which tied for the most in the restaurant space in 24 years, with three companies waiting in the wings. And Wiederhorn’s Fat Brands alone engineered four deals over the course of 2021, totaling nearly $1 billion.

But they represented the limitations of the mergers and acquisitions market in 2021. Strategic buyers and IPOs dominated the deal space. Private equity hasn’t been entirely out of the game—the investment firms have made a dozen such deals. But for the most part they’ve largely focused on franchisees or smaller concepts and avoided most of the big deals.

Here’s a look at the year in restaurant mergers and acquisitions.

The year of the IPO

Restaurant IPOs come in waves. This year that wave was a tsunami.

Five restaurant companies have gone public this year: Krispy Kreme, Dutch Bros Coffee, First Watch Restaurant Group, Portillo’s and Sweetgreen.

Three others have taken steps in that direction. Panera Brands (which is on this list for another reason), Fogo de Chao and MOD Pizza. If any one of those three companies go public between now and the end of the year—not necessarily a given due to a suddenly volatile stock market—that would make this the biggest year for industry public offerings in a quarter century.

The offerings could slow due to late-year stock market volatility. Yet they represent a major return of the restaurant IPO after a five-year drought.

The biggest deal: RBI to buy Firehouse Subs

Restaurant Brands International was due. It’s been four years since the owner of Burger King, Popeyes and Tim Hortons made an acquisition, so it was probably time for something. The brand operator turned its attention this year to Firehouse Subs, the Jacksonville, Fla.-based sandwich company, in a $1.1 billion deal.

That deal is expected to be complete by the end of the year. It gives RBI its fourth brand, and a legitimate growth chain. It will also promise to take Firehouse to markets outside the U.S., which is RBI’s strength. Firehouse CEO Don Fox will remain with the brand, which will keep its Jacksonville, Fla., headquarters. It also represented the single biggest transaction of the year.

Fat Brands’ buying spree

In early 2019, Fat Brands’ struggle to get financing was so acute that the company took out a $20 million loan from Sardar Biglari at a 20% interest rate.

The company then engineered a series of moves including a whole business securitization and a merger with CEO Andy Wiederhorn’s Fog Cutter Capital Group. The result has been the year’s most remarkable string of acquisitions.

After acquiring Johnny Rockets in 2020 for $25 million, Fat Brands acquired Global Franchise Group this year for $442.5 million; Twin Peaks for $300 million; Fazoli’s for $130 million and Native Grill and Wings for $20 million. Add it up and it’s about $900 million in deals, each of which has been financed using an expanded securitized debt structure.

Flynn Restaurant Group buys NPC International

Perhaps in historic terms this was the year’s biggest deal. Flynn Restaurant Group, the largest franchisee in the U.S., acquired NPC International, which until then was the second biggest franchisee.

In so doing, Flynn acquired 937 Pizza Hut restaurants to go along with 194 Wendy’s units. The $801 million deal was big and complex—it was announced in 2000. A judge approved the deal in January and it was complete in March.

Flynn, which already operated restaurants in the Arby’s, Applebee’s, Taco Bell and Panera Bread systems, got two more brands. The company now generates about $3.5 billion in sales from about 2,400 total locations.

The Panera Brands merger

The aforementioned Panera Brands was created in August, when JAB Holdings decided to merge three of its holdings together to create a single multi-brand operator.

Technically, we say that Panera Bread acquired Caribou Coffee and Einstein Bros. Bagels to create one big breakfast competitor. The deal created a 4,000-unit “powerhouse platform in fast casual.”

What’s more, the company plans to go public. Danny Meyer’s USHG Acquisition Corp., a special purpose acquisition company, or SPAC, will become a “cornerstone partner” with the company when it goes public and Meyer himself will invest in the business.

Freddy’s Frozen Custard and Steakburgers

There have been relatively few private equity deals but this was among the biggest. Thompson Street Capital Partners bought control of the Wichita, Kan.-based burger chain earlier this year for an undisclosed sum.

In so doing, Freddy’s is moving from a founder-owned brand to one owned by a private equity firm that will focus on growth. It named a new CEO in Chris Dull and a new CMO in Laura Rueckel and added to its development team as it looks to grow well beyond its 400 locations.

Meritage acquires Lou Malnati’s

Another private equity deal came in October when the private equity firm Meritage acquired the Chicago-based pizza chain Lou Malnati’s.

That deal was undisclosed, though Bloomberg said the acquisition valued the chain at $500 million—which would certainly make this one of the year’s biggest deals.

Lou Malnati’s has a large mail-order pizza business to go along with its 71 locations, most of which are in Illinois.

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