Oak Hill Capital Partners Buys into Next Phase of Checkers & Rally’s


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Private equity firm Oak Hill Capital Partners bought Checkers & Rally’s Restaurant Inc form Sentinel Capital Partners for $525 million. 

According to Checkers CEO Rick Silva, the private equity to private equity deal puts more firepower behind a long-term plan that started 10 years ago.

“Today is a wonderful day, but it’s part of a full 10-year journey for us,” said Silva.

That journey, dubbed the 2020 vision internally is a detailed plan to boost restaurant-level profitability, guest satisfaction and shed development costs. So far, the plan has helped Checkers outperform the industry.

“We focused on, of course, driving topline sales and we’ve had six consecutive years of same-store sales growth, we’re up 3.5% this year, up over 3% last year too,” said Silva.

“We’ve also increased restaurant profitability and restaurant margins by about 700 basis points, think about that: that’s about $70,000 for every restaurant, that’s the kind of thing that is part of the momentum.”

A new prototype slims the build out down to about $500,000 as well, but he said the story isn’t finished.

“What’s exciting about today is that Oak Hill hill is a wonderful partner for us because we are finally a growth company,” said Silva.  “And now we have a partner who can help us drive this forward because this story is only half written.”

The company has 250 restaurants in the pipeline, and 130 approved sites already being developed. Silva said it looks like the company will blow by their goal of 1,200 restaurants by 2020 out of the water. Currently, the company has about 800 locations. He said they’ll also be scaling systems and upgrading infrastructure, something Oak Hill specializes in.

“It’s good to have board that has gone though that,” said Silva. “With a really strong smart partner at the board level, they can say, 'We’re doing this at another portfolio company and this is an idea you might want to think about.'”

Silva said it’s a great time to be a restaurant brand when it comes to this type of financing. It’s something that just wasn’t available a few decades ago.

“Were lucky to live in this time. If you’re a business leader like I am and you’re a successful business like Checkers and Rally’s you have a lot of options,” said Silva. “Thirty years ago, it didn’t exist. Today there are so many firms that have raised a lot of capital and tare there and can help you grow. Before you were dealing with straight debt or if you needed equity you were going to public markets.”

The price eked up to $525 million after initial projections were for a $500 million deal. Silva said it was a great price for everyone involved.

“I think its an incredibly smart price all around, a smart price for Sentinel a smart price for Oak Hill given our pipeline and given our track record over the last 10 years of growing this business,” said Silva. “I think there will be a lot of people that wish they were Oak Hill in three or four years.”

Piper Jaffray and North Point Advisors advised Checkers on the contract with legal help from Kirkland & Ellis LLP. Jefferies LLC acted as financial advisor to Oak Hill in the transaction. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel to Oak Hill. 

The deal is expected to close in the second quarter of 2017. 

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