Since Neal Aronson founded Roark Capital Group in 2001, the company’s ambitions have grown along with the size of its investment funds.
Once known for finding mid-sized companies that it could grow and develop over a long period of time, Roark more recently has grown into a formidable, large-scale private-equity group thanks to its deals with Arby’s and CKE Restaurants. With 14 concepts, and more than $3 billion in equity capital, the company is one of the largest investment firms in the restaurant space.
But Aronson is no stranger to this type of growth. He founded Roark after selling a hotel franchisor, U.S. Franchise Systems, which he co-founded in 1995 and grew in five years from 22 hotels to more than 500
locations before selling it.
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That’s the kind of quick exit for which private-equity groups are known. But Aronson takes a different approach with Roark. From the get-go, the group’s strategy has been to hold on to its investments, help them improve operations, and then reap the benefits of the brands’ long-term growth.
“We believe in building these businesses,” Aronson said in an interview with NRN. “We’re investing in people and brands. It just takes a long time to do that. When you do, when you can think for the long-term like we do, it allows us to do some things that maybe some other people can’t.”
He continued, “It allows us to encourage people to try things. It allows us to encourage people to be able to make some mistakes. It allows us to not overreact or even react to bumps in the road. And it allows us to reward people for really good ideas.”
Among Roark’s first acquisitions was a $48 million deal for Carvel Ice Cream in 2001, a brand the company still owns. Aronson said Roark’s goal is to help the companies grow by improving operations — “not financial engineering,” he said.
It’s a strategy that has won the company, as well as its managing partner Aronson and his team, respect throughout the franchise and restaurant sectors. One of Roark’s managing directors, Steven Romaniello, is a former chairman of the International Franchise Association as well as an NRN Golden Chain award winner in 2011.
It has also helped Roark lure more investment, which has enabled the company to take on bigger deals. It paid $430 million to buy the Atlanta-based Arby’s from the Wendy’s/Arby’s Group in 2011. The next year it closed on a $1.5 billion investment fund, its biggest to date, and in late 2013 Roark bought CKE Restaurants Inc., the owner of Hardee’s and Carl’s Jr. That deal was reportedly valued between $1.65 billion and $1.75 billion.
Still, Aronson said the company looks for deals both large and small, and that approach hasn’t changed.
“We’ve always invested in large-, small- and medium-sized brands,” Aronson said. “But we’re thankful and lucky that investors have grown to be more excited about our approach over the years.”
There are reports that the company could file an initial public offering for its Wingstop brand, the 670-unit growth chain with an estimated $540 million in U.S. systemwide sales as of 2013. Aronson said not to expect an exit in 2015, and the company has said it would not comment on rumors.
He reiterated the company is always looking to buy, for the right brand and the right management team.
“We have a big appetite,” Aronson said. “We’re hoping to do a bunch more, and [we] just want to be investing capital with special brands and with special people.”
Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze