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Global Franchise Group acquires Hot Dog on a Stick

Firm acquires chain out of bankruptcy, plans for growth

The parent to the Hot Dog on a Stick chain has been acquired out of bankruptcy by Global Franchise Group LLC, a portfolio company of private equity firm Levine Leichtman Capital Partners, the firm said Thursday.

Carlsbad, Calif.-based HDOS Enterprises, parent to the 92-unit Hot Dog on a Stick chain, filed for Chapter 11 bankruptcy protection in February with the goal of restructuring lease agreements.

Terms of the acquisition were not immediately disclosed, but Hot Dog on a Stick joins a number of treat-focused restaurant brands operated by Atlanta-based Global Franchise Group, or GFG, including Great American Cookies, Pretzelmaker, Marble Slab Creamery and Maggie Moo’s Ice Cream & Treatery.

Combined with Hot Dog on a Stick, GFG will operate or franchise more than 1,100 units worldwide, including the U.S., Canada, Latin America and Asia.

Los Angeles-based Levine Leichtman has also invested in Cici’s Pizza and Quiznos, and currently holds a stake in Beef ‘O’ Brady’s and Wetzel’s Pretzels, according to the its website.

The firm acquired the franchise brands that make up GFG from NexCen Brands Inc. for $112.5 million in 2010.

Levine Leichtman officials said it intends to accelerate growth into new markets for Hot Dog on a Stick while leveraging GFG’s vast resources, particularly on the franchising side.

“The HDOS acquisition is an important strategic addition to the GFG platform, which will strengthen the company’s geographic footprint and provide yet another growth avenue for GFG. The transaction will be highly accretive and generate significant synergies that will ultimately provide value to all of GFG’s stakeholders,” Lauren Leichtman, co-founder and chief executive of Levine Leichtman, said in a statement.

Chris Dull, GFG’s president and CEO, said the franchise group will bring strength in brand management, marketing and franchising to the iconic brand, which was founded in 1946 and is known for its corn dogs and freshly squeezed lemonade.

“We can greatly accelerate growth while providing HDOS’s loyal customer base with even greater service and menu offerings in the years to come,” said Dull.

Hot Dog on a Stick was hit hard by the recession. The largely mall-based brand suffered as a result of declining retail foot traffic.

In court documents, the company blamed about 21 unprofitable locations with expensive leases for driving the chain to reorganize. The goal was to close those locations, reject the leases and pay off creditors over five or six years.

It was unclear Thursday whether those planned closures would occur. Officials with both Levine Leichtman and GFG declined to respond to requests for more information at press time.

In 2012, the chain opened its first drive thru location and was working to develop a presence outside of malls.

According to the chain’s 2013 franchise disclosure documents, Hot Dog on a Stick ended 2012 with 97 corporate units and six franchised locations. Corporate restaurants generated sales of about $33.8 million and had an average unit volume of $348,502.

Net income for fiscal 2012 was $432,300, compared with $59,800 in 2011. Revenue, including franchising fees and royalties, was $35.4 million in 2012, compared with $35.5 million in 2011.

Before the bankruptcy, Hot Dog on a Stick was known for being 100-percent employee owned, a precedent established by the estate of founder Dave Barham, who died in 1991.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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