Neal Aronson’s Roark Capital Group has developed a philosophy of buying and holding its restaurant investments and then profiting off the strength of those investments’ growth. It has rarely sold one of its acquisitions, making it something of a unicorn in a private-equity world in which companies are bought and sold in four- or five-year timeframes.
“Our strategy has been consistent — growth comes from operational excellence, not financial engineering,” Aronson said in 2015. “We use a lot less debt than most people. Our philosophy is about continuous improvement.”
Atlanta-based private-equity group Roark’s holdings include Arby’s, Carl’s Jr. and Hardee’s owner CKE Restaurants and multi-brand operator Focus Group.
2016 might have seemed like it would be a quiet year for Roark, at least on the restaurant side. Acquisitions, which have come fast and furious over the years, were concentrated in other lines of business.
But then, in September, the firm hit pay dirt, with a majority investment in the sandwich chain Jimmy John’s, one of the fastest-growing concepts in the country for years. And that earned Neal Aronson, the firm’s founder, a spot on Nation’s Restaurant News’ Power List Top 10.
Over the years, Roark has acquired 56 franchised or multi-unit brands with annual system sales of $23 billion and 25,000 locations. In Jimmy John’s, it acquired the 35th largest restaurant concept in the country, which Jimmy John Liautaud started when he was 19 and grew to more than 2,600 locations across the country. The acquisition gave Roark its 14th restaurant chain.
“I spent two years getting to know the Roark team,” Liautaud said at the time. “They are best-in-class people that have the know-ledge and expertise that will help us take this brand to the next level.”
The company uses less debt because it wants to enable that improvement. “It’s just a practical view,” Aronson said. “We want to make sure our brands and team members can invest in the right things to do business and not get distracted or hampered by leverage.”
It’s a strategy that can offset high prices, a key element in the current environment when many sellers are asking for the moon for their restaurants. Because Roark takes time to help its investments grow, and isn’t looking for a quick flip, it can afford to pay a higher price than some other groups.
It’s a strategy that also makes it among the first options when a restaurant company is looking for an investor.
“They approach investments with a long-term perspective and have a distinguished track record of supporting management teams in fulfilling their visions,” Sahar Sander, co-founder of Naf Naf Grill, which received a growth investment from Roark in 2015, said at the time.
Contact Jonathan Maze at [email protected]
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