On the Margin
Arby’s skyrockets in value

Arby’s skyrockets in value

This post is part of the On the Margin blog.

In 2011, Wendy’s sold its struggling sister company, Arby’s, to Roark Capital. In the five years since, Arby’s same-store sales have surged thanks to new product offerings, key store closures and strong advertisements.

Now we know how much this has meant for the Atlanta-based sandwich concept.

Roark paid The Wendy’s Co. $130 million in cash for Arby’s. But Wendy’s kept an 18.5 percent interest in the sandwich chain. At the time of the sale, that 18.5 percent interest was valued at $30 million.

On its earnings call Wednesday, company executives said that this 18.5 percent was worth about $260 million — for a full value of about $1.4 billion.

In other words: Arby’s since the sale has seen its valuation increase more than eight-fold. Wendy's interest now is worth far more than the whole chain was worth back in 2011.

And that’s probably a conservative estimate, by the way. Consider that Krispy Kreme Doughnuts Inc., a considerably smaller concept, is being taken private for $1.35 billion. Arby’s would certainly be worth more if it were put up for sale.

But that still is a strong indication of how far Arby’s has come over the years. In 2010, the chain was coming off a long string of same-store sales declines that had seen its unit volumes fall from more than $1 million to about $800,000. Costly leases burdened many company locations.

Arby’s started reversing those same-store sales declines in 2011 and since then has enjoyed a long string of sales increases. Same-store sales have increased for 22 straight quarters. And in the first quarter, same-store sales rose 15.3 percent on a two-year basis.

Meanwhile, the chain has started remodeling locations and is actually expanding again — its unit count fell by 10 percent between 2008 and 2014. Operators have recently signed on to build 138 locations. The chain currently has 3,300 units.

Arby’s, by the way, has been paying dividends for its shareholders. Last year, Wendy’s received a check for $54.9 million.

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze
 

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