Flurry of Big September Deals Pump Cash Into Restaurants


September has been an incredibly busy month for big deals in the restaurant space, and it’s not even half over. 

The largest deal, of course, was the majority stake Roark Capital took in Jimmy John's. The deal means the exit of Weston Presidio, but founder Jimmy John Liautaud remains as the largest individual shareholder.

But there were a slew of other deals as well as private equity digs deeper and deeper to invest in the restaurant industry.

Arlon Group acquired 440-unit Cici’s. The Texas-based brand has recently rolled out a revitalization to move away from its pizza-only perception, fueling 13 consecutive quarters of same-store sales growth. CEO Darin Harris, who joined the brand in 2013, said Arlon Group’s deep portfolio across the food industry will help propel the brand further.

“Arlon brings to Cici's significant expertise and experience from its extensive investments in the food and agriculture industry, and we share a commitment to growing our brand and bringing additional value to the company, team members, our franchisees and the guests who enjoy our restaurants,” said Harris. 

Wetzel’s Pretzels was traded between a pair of private equity firms. Los Angeles firm Levine Leichtman Capital Partners sold its majority stake to CenterOak Partners in an auction.

CEO, co-founder and largest individual shareholder Bill Phelps told the LA Times the brand was sold when Levine Leichtman was looking to exit.

“We went out and did an auction because they had to close out their funds,” Phelps said. CenterOak Partners “made the best offer both in terms of money and keeping the team in place.”

A pair of Mexican food brands also got some attention this month. Private equity giant L Catterton invested in four-unit, fast-casual Velvet Taco. The fresh and funky brand features street tacos such as one with an entire soft-shell crawfish.

The undisclosed growth capital will certainly be used to open up more small-format locations.

Baja Fresh also got a well-capitalized partner to end the shedding of restaurants in the past few years. Montreal-based MTY Food Group bought the 162-unit chain for $27 million. MTY CFO Eric Lefebvre said the $310 million June acquisition of Scottsdale, Arizona-based Kahala Brands (operator of 18 restaurant brands) will be a great platform to help Baja return to a growth trajectory.

“We just added a new toy to their box and they’re going to have another great brand that they can develop,” said Lefebvre. “We’re going to leverage the platform that we have and the good development team that we have in Scottsdale to really accelerate the growth of Baja.”

He said the initial investment in Kahala was key to its growth in the U.S.

“We’re not going to try to lead that from Canada,” said Lefebvre. “We’ve seen a lot of Canadian brands that go in to the U.S. and copy and paste what they’re doing in Canada, and most of them have failed.”

Look for MTY's first Thai Express in Minneapolis' Mall of America soon.

Each of these acquisitions fits in the recent backdrop of private equity groups investing big in the industry. And each shows both how aggressive they are to use that dry powder, but also how sophisticated the groups are when it comes to the restaurant space. As strong brands can pick and choose, those groups are elevating their knowledge and management depth to offer them more than just capital. 

Expect a few more interesting deals this month. 

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