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Checkers Drive-In Restaurants secured an added $20 million investment from owner Oak Hill Capital Partners.

Checkers and Rally's parent gets additional $20M investment from Oak Hill Capital

Injection will finance five-year strategic plan, drive-in brand CEO Frances Allen tells ICR Conference

Checkers Drive-In Restaurants Inc., the parent of Checkers & Rally's, has secured an additional $20 million investment from owner Oak Hill Capital Partners IV to fund the quick-service brand’s five-year growth plan, according to CEO Frances Allen.

The Tampa, Fla.-based quick-service burger brand will expand its franchise footprint and capitalize on its strengths in the COVID-19 pandemic foodservice environment, Allen told the 23rd annual ICR Conference on Wednesday.

The 836-unit brand found it was well-positioned before the pandemic was declared in March 2020 with its closed kitchens, double drive-thru lanes and delivery platforms, Allen said.

“We have new strategic plan that we started putting in place in 2020,” Allen said, and the brands’ planned growth over the next five years required a capital injection. “We have now secured that capital” with Oak Hill’s added investment, she said.

In March 2017, Oak Hill Capital Partners bought Checkers Drive-In Restaurants Inc. from Sentinel Capital Partners in a deal valued at $525 million. Oak Hill, the New York-based private-equity group, partnered with Checkers management on the deal.

Soon after the pandemic was declared in March 2020, Checkers shut down advertising and focused marketing on delivery.

“With a double drive-thru,” Allen said, “we were able to actually convert one of our drive-thru lanes to a dedicated e-commerce lane. That really helped drive sales and drive efficiency.” The delivery lanes were installed at about two-thirds of the company-owned restaurants, she said, and many franchises followed suit.

Checkers does not offer a breakfast daypart, but it does offer late-night service, which makes up about 25% of sales. That slipped early in the pandemic, but federal stimulus checks brought most of that back, Allen said.

Sales drivers this year, Allen predicted, will include Checkers’ launch last week of a loyalty rewards program through its smartphone application.

Capital investments include a new kitchen design in test that reduces 1.5 miles of worker walking per hour and new equipment, she said. “This will be a game-changer for the brand and one of the things we needed the capital investment for,” Allen said.

Peter Armstrong, a principal with Oak Hill, said in a statement that the private-equity firm was confident in supporting the brand.

"Checkers has demonstrated strong performance period after period despite the significant challenges brought by the events of 2020," said Armstrong in a statement. "Company and franchised restaurants recorded high single digit same-store-sales gains in 2020 and that momentum is continuing into the first weeks of 2021 because of the strategic marketing and operations plans rolled out before the pandemic, which were enhanced by the demand for contactless drive-thru and delivery experiences.”

Oak Hill said it approved the capital injection after the company's successful debt amendment efforts at the end of last year.

Checkers & Rally’s has 836 restaurants in 35 states and the District of Columbia. Of those, 572 are franchised and 264 are company-owned.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

TAGS: Finance
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