Five Key Reasons Flynn Restaurant Group Jumped into Arby’s
The acquisition of U.S Beef Corp.’s restaurants by the Flynn Restaurant Group is huge by any measure. In all, it was 368 restaurants with annual sales of $400 million. That means the Flynn Restaurant Group, which was the first franchise business to crest $1 billion, is now the first to top $2 billion with $2.3 billion in projected annual sales.
CEO Greg Flynn told Franchise Times there were many things that made the deal good, but five key things made the large, complex deal worth taking on.
Diversification to Mirror the Restaurant World
“This deal was perfect for us in many ways, starting with the whole industry segmentation. We already have flags in each of the major segments QSR, fast casual and casual dining, but QSR is much bigger than the other segments I think it's 70 percent of the entire industry,” said Flynn. “If we are trying to crate a portfolio and diversify between the segments and mirror the segments, it was logical for us to have a bigger footprint in QSR.”
For the Applebee’s operator, that’s been a key factor. While he said the Applebee’s segment of the business is bouncing back in a very substantial way, diversifying to better mirror the industry means if any one brand slows, the company will stay on solid footing.
“QSR economics are very good, they’re better than the other segments,” said Flynn. “The volumes are a little lower but the margins are a little higher, so you make really good money.”
In the latest Arby’s franchise disclosure document, AUVs hovered just over $1 million for U.S. franchised locations. And quick math has the U.S. Beef AUVs at $1.08 million per location.
He Loves Arby’s
“I love Arby’s in particular, it’s a very differentiated concept almost like a category of one like Taco Bell or Panera, neither of those two face any direct competitor that does just what they do that forces them to compete on price,” said Flynn. “Arby’s definitely competes with other QSR concepts and it’s very value conscious, as all of them have to be. But there is no one that basically sells the core products Arby’s sells, and there is a large body of people out there—core customers—that love Arby’s and love the food.”
That puts him in the enviable position of rising above the brutal value wars endemic in QSR burger player right now.
“I love being able to understand who that guest is and how to speak to them and how to give them what they want without it being this competitive head bashing all the time,” said Flynn.
‘Inspired’ Brand Leadership
"Then there’s the ownership and leadership. Rob Lynch the president of Arby’s came from Taco Bell with a marketing background and is just an exceptional executive with a deep understanding of marketing, and much of brand leadership is marketing,” said Flynn. “And there’s Inspire and Paul Brown, who is building a world class support team for their brands and I like that part of it.”
Inspire brands now oversees more than $12 billion in system sales across Arby’s, Buffalo Wild Wings, Rusty Taco and Sonic. The Roark ownership halo is also attractive.
“Then there’s Roark, not only do they have a good track record and they’re smart guys, but they are very willing to own and operative restaurants and invest in the restaurant assets,” said Flynn. “That is really refreshing compared to most other franchisors out there that are shedding restaurants from their balance sheet to and trying to go ultra asset-light, increasing the ever widening gulf of interest between franchisees and franchisors.”
U.S. Beef Corp are Great Operators
“It’s a great company, a 50 year old business, a third-generation business. They’re great operators in very desirable locations: Oklahoma, Arkansas, Missouri, Kansas Colorado—just great Arby’s markets,” said Flynn. “And they really know their business; having been doing it for literally decades, and the whole team came with us.”
While massive, the scale was a major benefit too. Unlike most acquisitive companies Flynn is able to grab national coverage in one deal.
“Normally we have to get into a system by making a smaller acquisition and adding on and building restaurants and finally hitting critical mass,” said Flynn. “This is one stop shopping.”
He said the company will get to work implementing the Flynn way of doing things immediately and integrating the new Tulsa, Okla.,-based team based with the 150-strong Cleveland support office and the San Francisco-based management team. He said he would also take a little break from acquisitions after taking on this monster deal.
Terms of the deal were undisclosed.