Taco Bell Burger King

Franchised Taco Bell, Burger King units change hands

Recent large-scale deals show that investors are still interested in legacy brands

Franchisee-owned restaurants continued to change hands this week, as two deals involving Burger King and Taco Bell units show that investors remain interested in large, mature brands. 

In one deal, Los Angeles-based private-equity firm Brentwood Associates sold K-Mac Holdings Corp., the large Taco Bell franchisee. The unnamed buyer was only described as a “private-equity firm.” 

In another deal, GPS Hospitality sold 43 Burger King locations near Cincinnati to Carrols Restaurant Group. The deal followed GPS Hospitality’s acquisition earlier this week of 194 Burger King locations along the Gulf of Mexico.

Such deals come as readily available financing to large-scale franchisees is fueling unprecedented growth at those companies. A more difficult operating environment with rising labor costs, as well as many franchisees retiring and refranchising deals by franchisors, is also driving growth. 

Even operators buying and selling constantly remain on the lookout for additional deals.

“If a good opportunity presents itself, we’ll take a look at it,” GPS Hospitality founder and CEO Tom Garrett, a former Arby’s CEO, said in an interview last week.

GPS Hospitality aims to generate more than $1 billion in annual revenue by 2022. 

Brentwood Associates and K-Mac announced the sale of K-Mac — one of Taco Bell’s largest operators — late Tuesday. In an interview Wednesday, K-Mac CEO Sam Fiori would not say who the buyer is, and described it only as a private-equity firm that for now wants to remain private.

K-Mac is one of the largest franchisees in the country. Brentwood Associates acquired the company in 2011, in partnership with Arlon Food and Agriculture Investment Program. 

K-Mac has since grown from 190 locations to 294 units. In addition to 271 Taco Bell locations, K-Mac operates 17 KFC restaurants and six Golden Corral units. The Fort Smith, Ark.-based franchisee operates restaurants in nine states, including Arkansas, Missouri, Texas, Indiana, Illinois, Tennessee, Kentucky and Mississippi.

Fiori will remain with the company, as will K-Mac president and chief operating officer Tina Reagan.

“It’s business and usual,” Fiori said.

The Carrols-GPS Hospitality deal is between two of Burger King’s largest operators. Carrols is Burger King’s largest franchisee, and has been on an aggressive acquisition string in recent years since acquiring the right of first refusal to buy franchisees that are put up for sale in 19 states.

Carrols acquired 56 locations in 2016. The 43-unit purchase from GPS Hospitality “gives us a good start for 2017, and provides us with a strong foothold in the greater Cincinnati market,” Carrols CEO Dan Accordino said in a statement. “Looking ahead, we remain confident in our ability to enhance long-term shareholder value through our ongoing acquisition strategy.”

Only this week, GPS Hospitality took ownership of 194 locations in Louisiana, Mississippi, Alabama, Florida and Arkansas from SRAC Holdings. 

“Carrols is the largest franchisee in the state of Ohio, so consolidation in the market makes sense for them,” Garrett said in an emailed statement. “The timing worked well for us as we planned on acquiring 194 restaurants in a new market. We have a much bigger opportunity for growth in our new market and we are very excited for the opportunity to bring GPS Hospitality’s service and values to this region.”

Update: Dec. 21, 2016  This story has been updated to include a comment on the sale from Tom Garrett, founder and CEO of GPS Hospitality.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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