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Strategic Buyers, Legacy Brands Looking Abroad


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Sales are mediocre, traffic is down but some internationally minded restaurant groups are not worried. That’s because while there are challenges in the U.S. market, there is an incredible amount of opportunity abroad.

“Despite all the U.S. challenges, we’re still the most beautiful bell at the ball,” said Michael Phalen, managing director at Wells Fargo Securities during the 2017 Restaurant Finance and Development Conference.

Overseas consumers have a special affinity for American brands, and there are many well-capitalized partners eager to help them expand.

And at Taco Bell, for example, new innovations around in-store efficiency and a new small-format, urban design means growing in high-labor and dense urban markets makes a lot more sense.

“We strive to be ‘all access,’ everything from mobile, to kiosks to robotics to bring technology in to do something better faster and ideally cheaper,” said Taco Bell CFO and soon-to-be President of International Liz Williams. “And we’re certainly pushing international now that we have this urban footprint.”

She said they’re learning a lot from international companies as well. A new open kitchen design was actually created overseas and is coming home to the U.S. market.

For big strategic companies, international growth is a key mission. And when one sees sky-high sales prices based on huge multiples of earnings before interest, taxes, depreciation and appreciation (EBITDA), international operations start to make more sense.

Restaurant Brand International (RBI) the parent company of Burger King recently spent an incredible amount of money on Popeyes Louisiana Chicken when they bought the company for 20 times EBITDA.

“If you ask RBI why, their primary enhancement will be international growth. They can see that KFC has 10,000 international units and Popeyes has 600,” said Phalen.

Even if the brand never reaches the scale of KFC, that’s a glimpse at the near limitless white space abroad.

It could be a similar story for JAB, the Luxembourg-based family office that has gobbled up a handful of coffee and breakfast brands from Peet’s to Kurig and, more recently, Panera and Au Bon Pain. They know they can integrate these brands into the company infrastructure and grow, grow, grow.

“The activity level of the strategics makes a big difference, when they’re looking at it, they’re looking post synergies. They can take costs out of the acquisition or revenue synergies, in the case of JAB, how can we accelerate the revenue by putting them into their supply chain,” said Damon Chandik, a managing director and head of restaurant investment banking at Piper Jaffray.

While JAB hasn’t said much about international growth, its one of a handful of smart, global companies that can afford to grow into just about any global market and take advantage of the love of American brands. 

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Tom KaiserTom Kaiser is associate editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
 
Beth EwenBeth Ewen is editor-in-chief of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is staff writer at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonLaura Michaels is managing editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
 twitter.com/mlarson1011.
 
Nancy WeingartnerNancy Weingartner is editor-at-large of Franchise Times magazine and the editor of the Food On Demand media project. You can reach her at 612-767-3200 or at nancyw@franchisetimes.com.
Follow her on Twitter at http://twitter.com/nanweingartner.
 

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