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Is Roark Capital the New Brinker?

June 13, 2011

Once upon a time, Brinker was the restaurant powerhouse, owning such chains as: Chili’s, Romano’s Macaroni Grill, Corner Bakery Cafe, On the Border Mexican Grill & Cantina, and Maggiano’s Little Italy to name a few. Now, due to restructuring among other things, Brinker only operates Chili’s and Maggiano’s Little Italy. But then again, there is Yum! Brands. These guys operate KFC, Pizza Hut, Taco Bell, Long John Silver’s, and A&W Restaurants (the latter two soon to be sold). Maybe Brinker was the interim Yum! Nonetheless, there’s a new major player in the restaurant industry and they are making their mark on it fast.

Roark Capital Group, the Atlanta-based private-equity firm that owns McAlister’s Deli, Wingstop Restaurants Inc., and Focus Brands (the franchisor of Carvel, Seattle’s Best Coffee, Cinnabon, Schlotzky’s, Moe’s Southwest Grill, and Auntie Anne’s Pretzels) has in the last month purchased Corner Bakery and its affiliates (Il Fornaio America Corp.) and Arby’s. Though the sale of Corner Baker did make the headlines, the long-awaited sale of Arby’s will probably be the biggest restaurant news this year — well, until Long John Silver’s and A&W Restaurants are sold… hint, hint, Roark. All of the Arby’s details will be finalized by the beginning of the third quarter.

Roland Smith, chief executive at Wendy’s/Arby’s Group, stated, “This transaction provides substantial value to our stockholders, as it is expected to be accretive to earnings, deleverage the balance sheet and allow us to devote our full attention and resources on the exciting growth opportunities we have at Wendy’s.” Not only are they benefiting from Wendy’s, but also from the 18.5% ownership interest in Arby’s. That will really pay off when Roark Capital invests $50 million into the business and another $50 million over time.

All-in-all, I’m pretty excited to see what will come of Arby’s in the coming years and what the $50 million will look like in the end. Roark didn’t let me down with the acquisition of Wingstop, so I see no reason why they would do it here. Just don’t make my wife angry — she loves Arby’s and she’s pregnant.


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