Two large Burger King franchisees recently completed a series of acquisitions involving more than 150 locations in the Midwest and Texas, highlighting a massive wave of consolidation in the burger franchise.
Atlanta-based GPS Hospitality bought 60 Burger King locations in Michigan from Team Schostak Family Restaurants, the company said Tuesday.
Texas-based operator Sun Holdings, meanwhile, just completed a trio of transactions for a total of 84 Burger King restaurants throughout Texas, and owner Guillermo Perales said he has 20 more units under contract.
“We’re having a good year, no question about it,” Perales said. “We’ve had very good [same-store sales]. I think 3G Capital [Burger King’s controlling shareholder], they’re doing a good job.”
Terms of the deals were not disclosed. But the acquisitions highlight a growing wave of consolidation within the franchise business as larger franchisees buy smaller franchisees, quickly creating large-scale operators with hundreds of units.
Both GPS Hospitality and Sun Holdings have quickly become two of Burger King’s largest operators.
GPS Hospitality is just 3 years old. The company is based in Atlanta and has used several acquisitions to quickly amass nearly 200 locations in the Midwest and the Southeast.
“These new restaurants mark continued growth for GPS Hospitality in the Midwest, and we look forward to bringing our brand of service and guest experience to the people of Michigan,” Tom Garrett, CEO of GPS Hospitality, said in a statement. “Team Schostak is a very established and highly regarded company, and we’ll continue their tradition of excellence.”
Sun Holdings, meanwhile, has grown from 60 Burger King locations to nearly 300 over that same time period. The company also owns 100 Popeyes locations and 50 Arby’s units.
Several factors are fueling the consolidation wave. One factor is there are more buyers, especially for brands that are performing.
Sun Holdings and GPS Hospitality are both in buying mode, and Burger King has a lot of momentum, with same-store sales in the first quarter increasing nearly 7 percent.
Another factor is franchisees buying locations have access to capital. Several investment groups and lenders are willing to finance franchisee transactions.
GPS Hospitality was able to buy out Team Schostak’s Burger King locations with investments from a pair of family investment firms, The Cynosure Group and Nonami Investments.
Sun Holdings, meanwhile, recently closed a $230 million credit facility, led by BVA Compass.
The availability of capital and eager buyers are raising prices. Some companies are opting to sell, such as Team Schostak, which has recently bought several Applebee’s units and is also a franchisee in Michigan of Del Taco and Mod Pizza. Schostak had owned the Burger King locations in Michigan for 34 years.
“Fortunately, we found a very qualified buyer in GPS Hospitality,” Mark Schostak, executive chairman of Team Schostak, said in a statement. “The GPS leadership team shares the same values and operational philosophies and we are confident in their ability to continue to successfully grow and operate the Burger King brand, making this transition as seamless as possible for everyone involved.”
In addition, many franchisees, especially in older, legacy concepts, are retiring and opting to sell now that prices are high and there are buyers. Many of the locations Perales is buying came from retiring operators.
“There’s still a lot of succession happening,” he said. “There are a lot of sellers in their 70s, and they want to get out. There’s definitely going to be more consolidation. It’s very active. Definitely.”