When it comes to restaurant chain acquisitions, 2023 wasn’t exactly known for its nonstop action. Let’s put it this way: If we were to develop a list of the 10 largest deals for restaurant chains, more than one of those listed would be debt-for-equity swaps for companies either close to or in bankruptcy.
That doesn’t make this an uninteresting year. We had Subway, after all, which kept us restaurant finance editors pretty well occupied for much of 2023. There were a couple of real, live IPOs. And one chain finally found a buyer after looking for nearly two whole years.
Suffice it to say, this year-end piece will not focus on the year’s biggest deals but instead will examine the most notable acquisitions of 2023. Starting with, well, the biggest.
Roark’s Subway deal
Subway was on the market all year long and finally found a buyer in Roark Capital for $9.6 billion, which apparently includes an earn-out provision that will require the company to meet certain metrics.
Then the FTC apparently stepped in to investigate whether Roark, which seems to buy just about everything, actually owns everything. So, we end the year with a little uncertainty as to when this deal will actually be complete. But we’re putting it here, anyway.
The Cava IPO
In 2021, a bunch of restaurant chains either said they planned to go public or filed to do so. And then the world changed, interest rates soared, inflation soared, and everything sort of ground to a halt. And then Cava came along.
The fast-casual Mediterranean chain proved the adage that a good company can go public in any market, raising $318 million in an initial public offering. It didn’t exactly break the IPO dam—only Gen Korean BBQ and its $41.5 million IPO followed suit. But it at least got the ball rolling.
Bain buys Fogo
One company that definitely planned to go public was the Brazilian steakhouse concept Fogo de Chao, which had been signaling IPO almost from the moment it went private. And then it remained private with a sale to Bain Capital.
Terms of that deal were not disclosed but, according to Reuters, Bain agreed to pay $1.1 billion for the steakhouse concept. Which is apparently the going rate to keep a high-volume steakhouse chain from going public.
Darden buys Ruth’s
Did Darden’s board of directors just wake up one morning craving steak and then they bought Ruth’s? In what was quietly a major strategic deal, the owner of Olive Garden bought the venerable steak chain for $715 million.
The timing, however, may not be great, as beef prices are at the outset of a muti-year inflationary cycle and the company already owns an upscale steak concept called Capital Grille. But honestly, consumers love steak, so why not.
Pollo Tropical finally finds a buyer
Fiesta Restaurant Group sold Taco Cabana and quickly decided that it should probably sell Pollo Tropical, too. This was in December 2021. The timing couldn’t have been worse. The M&A markets froze. The company struggled to find anyone willing to take the chain private for something resembling a premium.
But Pollo Tropical did find a buyer in Garnett Station Partners, which has been quietly one of the more active private equity firms in the restaurant industry this year, for $225 million.
By the way, it is here where the deals get much smaller. So let’s shift to some interesting trends.
Doubling down on international
Restaurant chains have been all about international in recent years, given that 96% of the world’s population does not live in the U.S. But recently, big chains have put their money where their mouths are.
The most notable of these came when McDonald’s acquired the stake in its China business owned by Carlyle. But KFC also acquired 218 locations in its UK market, while Papa Johns also acquired 91 locations in the UK. Oh, and we might as well throw this one in: Greg Flynn, the franchisee bigger than most brands, agreed to buy Pizza Huts in Australia.
Brand platforms!
There are so many small restaurant chains out there that it is relatively simple for someone with a little capital to amass a few of them and create their own “brand platform.” And just about everybody is doing it right now.
For instance, the fast-casual pizza chain 1000 Degrees bought fast-casual pizza chain My Pie and said it would create a brand platform. Xperience Restaurant Group, the owner of Chevy’s, acquired Rio Mambo Tex Mex and The Rim. And Craveworthy Brands bought a handful of names last year, or at least it seems. Oh, and brand platform Fat Brands bought Smokey Bones for $30 million simply so it could convert many of its 61 units to Twin Peaks restaurants.
What about next year?
Well, we probably know next year will at least be more active. And there could be some interesting names on the market. Insomnia Cookies is on the market right now. Jersey Mike’s could be one, depending on what owner Peter Cancro decides. Panera Brands is mercifully going public, finally. And maybe that Subway deal will be completed.
This story is part of Restaurant Business’ look back at 2023. Click here to read our other year-end coverage.
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