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What restaurant chain could be sold next?

Several companies have gone private this year. RB’s The Bottom Line takes a look at who could go next.
Photograph courtesy of Red Robin

The Bottom Line

When Zoe’s Kitchen announced that it was being sold to Cava Grill, in a deal backed by former Panera Bread CEO Ron Shaich, the news came as a surprise. But maybe it should not have.

This is, after all, a year for going-private deals. The Zoe’s deal was the second such sale just this month, after Focus Brands said it would buy Jamba Juice.

Earlier this year, Fogo de Chao, Buffalo Wild Wings and Bravo Brio Restaurant Group were all taken private.

Zoe’s had been an investor darling for years until weakening same-store sales and profits led its stock to plummet. That brought its valuation down to a level that made the company an attractive target for a group of highly regarded investors.

Others could come, too. We took a look at some of the companies still on Wall Street that could be attractive takeout targets for resourceful investment firms or strategic buyers. Keep in mind that this is all just speculation and rumor. And just about any chain could be sold at any time so long as there is a willing buyer.

Bojangles

There has long been rumors that Bojangles could be taken private. The company went public in 2015 and traded near $30 a share but has hovered below $15 for the past year as the chain faces concern about sales performance.

Its enterprise value multiple is less than 10x earnings before interest, taxes, depreciation and amortization, or EBITDA. That’s typically the magic number at which companies can become potential takeout targets.

The Charlotte-based chicken chain is closing some locations and refranchising others. Chicken is a well-loved protein. It has breakfast, which makes it unique, along with unit volumes just under $1.8 million that are still fairly attractive despite a 3% decline last year. More to the point, it has more than 300 company owned units that a buyer could refranchise.

Del Taco

Not long ago, I wrote that Smashburger’s Philippines-based owner, Jollibee Foods, wanted to buy a Mexican concept. Of all the chains I mentioned in that post, the one that made most sense to me was Del Taco.

Jollibee could certainly afford the California-based chain, which could probably be had for less than $1 billion. And it would get one of the more consistently strong performing publicly traded restaurant chains.

Red Robin

This isn’t exactly the best environment for casual dining chains but hear me out. The company’s sales problems this year have led to a steep decline in its stock price. Red Robin’s stock hasn’t been this low since 2012-2013.

That would make it ripe for an activist. But the company’s valuation could also lure potential buyers who see a bargain.

And there are plenty of potential buyers out there right now trying to craft multi-concept companies.

Habit Burger

Unlike Bojangles, Habit is actually at close to its 52-week high and is up 50% since June thanks largely to unexpectedly strong performance in the second quarter. That makes it a bit costlier—with a multiple of 13 times EBITDA, which could scare away potential buyers.

And burgers are a highly competitive sector where plenty of hot chains have come down from their previous highs. Companies like Shake Shack and Smashburger continue to add locations in the U.S.

Still, it is a growth chain that could franchise and has strong unit volumes and plenty of white space.

Papa John’s

This is the obvious one, isn’t it? I probably don’t need to cover this topic that much here, but a buyout led by founder John Schnatter and his 30% ownership remains a possible end game for the controversy surrounding the chain.

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