Wassim Arabi, CEO, M.H. Alshaya Co.
As chief executive of M.H. Alshaya Co., Wassim Arabi oversees 42 different freestanding retail establishments at the months-old Yas Mall in Abu Dhabi, including restaurant, fashion and apparel, home furnishing, health and beauty, pharmacy and optical accessories brands. Among them are 10 licensed foodservice concepts, including P.F. Chang’s China Bistro, Shake Shack, Starbucks and sister brand Teavana, Texas Roadhouse and The Cheesecake Factory. The company also fields 15 concessions within other businesses there.
Alshaya’s ability to virtually fill out a small mall with just the stores from its portfolio of 70-plus widely recognized brands, along with its 31 years of experience as a retail operator in the Middle East, North Africa, Russia, Turkey and Europe, makes the company and, by extension, Arabi “very influential in its regions,” said Michael Schaefer, head of beverages and foodservice at research firm Euromonitor International. When you need a partner in the Middle East, Arabi and Alshaya are it.
“There are a limited number of operators who can provide the kind of scale and know-how they offer, while also providing access to prime locations,” Schaefer said.
M.H. Alshaya Co. is part of the Alshaya Group family business created in 1890, which also owns real estate and construction concerns, among other businesses. As of late December, the retail arm operated more than 2,600 stores, including the 900 restaurants, coffee bars, bakeries, snack and gourmet edible outlets under its 24-brand food division. It operated about 600 stores a decade ago.
Arabi, who has worked for Alshaya since 1989 and was named chief operating officer in 2003 and chief executive officer in 2007, has played a central role in developing and diversifying the retail portfolio that many observers consider critical to the company’s success. Arabi’s top priority is delivering on the company’s ongoing growth agenda.
— Alan J. Liddle
J. Michael Chu
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J. Michael Chu, Managing partner and co-founder, Catterton
J. Michael Chu likes to invest in restaurant brands that are young, underdeveloped and brimming with growth potential.
Chu co-founded the Greenwich, Conn.-based private-equity firm Catterton, where he and partners Scott Dahnke, Jonathan Owsley and Andrew Taub have dived deep into the restaurant space.
Catterton, in recent years, has invested in a number of small but up-and-coming operations, including chains like healthful concepts Protein Bar and Snap Kitchen, the sandwich chains Bruxië, Mendocino Farms and Primanti Brothers; as well as “Italian burrito” concept Piada Italian Street Food.
The firm has proven that it has a good eye for growth potential.
Catterton, for example, bought into P.F. Chang’s China Bistro when the Scottsdale, Ariz.-based chain had only a few locations in 1996. That chain held an initial public offering two years later and ended fiscal 2013 with 211 U.S. restaurants with sales of $899.6 million, according to the annual Top 200 census by Nation’s Restaurant News. P.F. Chang’s went private in a $1.1 billion deal with Centerbridge Partners L.P. in 2012.
“There’s no accident that the vast number of businesses we invest in tend to be new businesses that are emerging,” Chu said during a CNBC Squawk Box interview in 2013.
Emerging restaurant companies cost less to buy, and a Catterton cash injection has a more substantial and immediate impact on them. It also allows Chu’s group to borrow less.
“We generally don’t use a lot of leverage in our businesses … we tend to over-equitize them,” he told the Squawk Box panel.
Since too much debt can burden a business, he added, “We never want the balance sheet, post investment, to ever impede or conflict with the business strategy.”
However, part of managing Catterton’s $4 billion portfolio is balancing the newcomers with proven winners, such as Bloomin’ Brands Inc., parent of the casual-dining Outback Steakhouse chain, as well as the casual-dining Cheddar’s and fast-casual Noodles & Company.
Realized investments in the restaurant space include First Watch, Baja Fresh Mexican Grill and Caribou Coffee.
“We do like businesses with real history to them,” Chu said.
— Steve Coomes
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Fabián Gosselin, CEO, Alsea S.A.B. de C.V.
Determined to build share and sales in the hot Latin America market as well as in Spain, Alsea S.A.B. de C.V. CEO Fabián Gosselin has proven willing to buy gains, as well as coax organic improvement.
Mexico City-based Alsea was until recently known only as a large franchisee and Mexico-Latin America champion for nine growth-minded U.S. franchisors, including Burger King, Domino’s Pizza, Starbucks Coffee and Chili’s Grill & Bar. But since the end of 2012 it has added six proprietary brands while boosting its overall base of company-operated restaurants and units subfranchised to others by over 90 percent, or from 1,421 units to 2,708 locations.
Most of that unit growth was accomplished through a series of deals that consolidated publicly traded Alsea’s power as a franchisee, such as through its securing of Burger King’s master franchise agreement for Mexico.
The Wall Street Journal reported after Alsea announced the acquisition of Grupo Zena, a Burger King and Domino’s franchisee in Spain, that some stock analysts believed it was taking on too much. However, 51-year-old CEO Gosselin, who earlier characterized the Grupo Zena purchase as “an unequalled opportunity for growth,” held that consolidating that operation likely would prove a “minimal distraction.”
Research firm Euromonitor International forecast that Alsea’s primary operating regions will see over 65 percent growth in foodservice sales, to $476.4 billion, between 2013 and 2018.
In terms of net sales, Alsea reported fiscal 2013 growth of 16.3 percent, to $15.72 billion pesos, or about US$1.18 billion, with a portfolio-wide same-store-sales boost of 8 percent contributing to that improvement. Since Gosselin’s October 2010 promotion to CEO from corporate director of shared services, the company’s stock price had roughly tripled. If needing a partner in Latin America, Alsea is the go-to company.
— Alan J. Liddle
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Phil Romano, Restaurateur
Phil Romano never seems to run out of ideas.
Romano’s Macaroni Grill, Fuddruckers, EatZi’s Market & Bakery, Spageddies, Cozymel’s, and Rudy’s Country Store and BBQ are just a few of the more than 30 concepts he has come up with over the past 40 years in the restaurant business. Some are no longer around, such as Styks, while Romano’s Macaroni Grill and Fuddruckers have spread nationwide.
Romano served as a consultant and joint venture partner for casual-dining giant Brinker International Inc. from 1989 through 2002. He was also a national operator, developer and franchisor of numerous restaurant concepts, including Brinker’s Chili’s Grill & Bar.
But that’s the past.
Today, Romano is shaping the future of foodservice with an eye toward up-and-coming restaurant concepts. To develop more ideas and support young entrepreneurs, Romano, through his West Dallas Investments L.P., became a partner in the Trinity Groves restaurant incubator. The destination is a 15-acre retail and entertainment complex in Dallas that supports new dining ideas. Entrepreneurs submit concepts for review by an advisory board of industry veterans and Romano, and ideally receive the support they’re looking for to succeed.
Since 2012, the project has launched 10 restaurants that serve everything from tapas to hot dogs, as well as a brewery. The latest, just opened in July, is Potato Flats, which is a fast-casual concept based on smashed potatoes and customized toppings.
“The response from people has been tremendous,” Romano told Nation’s Restaurant News last summer. “We want everyone to do at least a million or a million and a half [in annual sales], and most are doing that.”
Romano said he expects the Trinity Groves incubator to have between 18 and 19 restaurants shortly.
— Dina Berta
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James Walsh, Managing director, Jefferies Group LLC
When James Walsh joined Jefferies as managing director in 2007, the investment bank announced his arrival as a signal that it had big plans for the food and restaurant sector. After all, Walsh had a 20-year track record that included leading deals for Landry’s Restaurants, Red Robin Gourmet Burgers and Jack in the Box.
Walsh built out a team with one goal in mind: to look for opportunities in the retail and restaurant sectors. He quickly made good on that goal.
His calling card? Creative structuring of debt to finance big-time, sometimes complicated deals.
During the financial crunch of 2007, Landry’s needed to refinance its bonds, and turned to Walsh and Jefferies. “The whole senior management team got involved and got it done,” Landry’s CEO Tilman Fertitta told the Wall Street Journal in November, when recalling the deal. “I’ll never forget that.”
But Walsh and his team, including John Tibe, the U.S. joint head of retail investment banking, also win in capital raising and M&A advisory. The firm has completed 78 transactions in the foodservice space since 2010, with 2014 being one of the most active years yet.
Under Walsh’s watch, Jefferies advised private-equity firm Golden Gate Capital in its $2.1 billion buyout of Red Lobster from Darden Restaurants Inc. Near the end of 2014, Jefferies was one of several banks rumored to bring to market the speculated $125 million initial public offering of Bojangles’ Chicken & Biscuits, capping a year where it also helped take public the El Pollo Loco, Zoës Kitchen and Papa Murphy’s brands.
It served as joint book runner on Zoës $100 million IPO, and the left lead bookrunner for Dave & Buster’s IPO, which took in more than $100 million, and El Pollo Loco, which saw a $123 million equity offering.
— Mercedes Cardona
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Patrick Walsh, CEO, PW Partners Atlas Funds LLC
Restaurant companies may not always want to hear from him, but when they do, they should expect someone eager to facilitate change. As a sometimes aggressive activist investor, Patrick Walsh, chief executive of Chicago-based PW Partners Atlas Funds LLC, shakes up underperforming companies by driving change to improve operations and boost shareholder value.
Take Famous Dave’s of America Inc., where Walsh successfully won a board seat last year. With Walsh and former McDonald’s executive Ed Rensi on the board, the company’s stock price nearly doubled shortly. Though Famous Dave’s stock price has come down from its all-time high of $34.70 in June, it is still about 34-percent higher than it was a year ago.
BJ’s Restaurants Inc., which seated Walsh on the board in June, reported a nearly 78-percent increase in net income for the third quarter of fiscal 2014 — and its first same-store sales increase in five quarters.
Walsh’s investor activism has had its ups and downs. As a partner at Oak Street Capital Management LLC in 2011, he led an unsuccessful proxy fight to replace the chief executive, board chairman, and past chair of Denny’s Corp.
That year he also fought unsuccessfully for a board seat at Red Robin Gourmet Burgers Inc. Oak Street’s filings with the SEC criticized Red Robin’s turnaround plan as a “cookie cutter” list of initiatives. Still, amid the activist pressure, Red Robin reported a 14-percent increase in net income in fiscal 2013 and a same-store sales increase at company units of 4 percent. The company’s stock price jumped about 61 percent in the course of a year.
— James Scarpa
This article has been revised to reflect the following correction:
Correction: Jan. 21, 2015 An earlier version of this article referred to private-equity firm Catterton incorrectly. The firm's name is Catterton, not Catterton Partners.