NPC International Inc. has acquired 140 Wendy’s restaurants once owned by one of the chain’s largest franchisees, DavCo Restaurants, in a seismic shift in unit ownership at the Dublin, Ohio-based burger franchise.
The deal is the second Wendy’s acquisition for NPC, more than doubling the company’s Wendy’s holdings and making the Overland Park, Kansas-based operator the chain’s largest franchisee. It now operates 386 Wendy’s restaurants. NPC is also the country’s largest Pizza Hut franchisee.
“We look forward to capitalizing upon the terrific opportunity in this market by delivering upon the Wendy’s brand promise each and every day,” NPC CEO Jim Schwartz said in a statement.
The sale comes more than two years after Wendy’s sued DavCo over its refusal to remodel restaurants. DavCo is no longer a franchisee of the quick-service chain, according to a Wendy’s spokeswoman.
Wendy’s acquired the locations from DavCo and then sold them to NPC. As part of the deal, the franchisee agreed to remodel 90 of the locations by the end of 2021. The franchisee also agreed to build 15 new restaurants by the end of 2022.
Seven restaurants were closed just before the deal was completed, according to an SEC filing.
NPC’s acquisition is its second major purchase of Wendy’s units this year. In March, the company acquired 62 locations from Valenti Mid-Atlantic Management LLC for $52.6 million. NPC’s two acquisitions this year total 202 Wendy’s locations.
NPC is one of largest franchisees in the U.S., and one of the largest restaurant operators of any kind. It operated 1,410 restaurants at the end of 2016, including 184 Wendy’s units and 1,226 Pizza Hut locations.
The sale also furthers Wendy’s buy-and-flip strategy of using franchisee-to-franchisee transactions to encourage operators to remodel and build new restaurants. The company facilitated such buy-and-flips in the first quarter, executives said last month, and now expect to facilitate the transfer of 475 locations this year.
The sale was not a traditional buy-and-flip, however. According to SEC filings, Wendy’s expects to record a loss on its acquisition of the restaurants and their subsequent sale. Still, the company has been aggressively working to get its restaurants into the hands of operators more willing to remodel and build new locations.
“Buy-and-flips ensure we are putting restaurants in the hands of well-capitalized franchisees that are committed to long-term growth, which will provide great benefits to our system going forward,” Wendy’s CEO Todd Penegor said during an earnings call last month.
“We’ve got a lot of long-tenured franchisees looking at what they want to do in the next chapter of their life,” Penegor added. “We’ve created a lot of interest for folks wanting to get to Wendy’s and have created a very liquid market. So it gives them the option to move to the next stage of their life, and we’re here to facilitate.”
Update: June 1, 2017 This article has been updated to clarify the nature of the sale and to include comments from NPC International.
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