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The Dealmakers

How 11 heavyweights landed the year’s boldest deals


Dan Accordino and Paul Flanders

CEO Dan Accordino, right, with CFO Paul Flanders, pulled off our Deal of the Year at Carrols. 

“How’d they do that?” is the question asked whenever anyone buys or sells a company. These days private equity firms, multi-unit franchisees, founder-operated franchisors and more are doing so in record numbers. Franchise Times presents tales from the smartest players in the business, as selected from nominations by a panel of judges. Carrols Restaurant Group, our 2013 Deal of the Year, leads the pack, and Trinity Capital’s Kevin Burke, cited for Special Achievement, provides a fit ending. In between are nine audacious dealmakers who only take “yes” for an answer.

They waited in an airplane hangar in Kansas City last May, sweating out the final, crucial piece to their multi-part transaction designed to boldly remake Carrols Restaurant Group—or to fall flat on a very public stage if it failed to close.

Dan Accordino, CEO, and Paul Flanders, CFO, had already made a big splash announcing the deal’s components. They would spin off Fiesta Group and its growth brands as a separate publicly held company. They would purchase 278 corporate-owned restaurants from Burger King to give Carrols something to grow. 

They would remodel all those new stores plus the nearly 300 already in hand for $300,000 each. They would enjoy right of first refusal in 20 states whenever a franchisee’s unit came up for sale—an unprecedented concession by a franchisor and proof that Burger King wanted those remodels, and badly.

But first, they needed to sell $150 million in high-yield bonds to finance it all.

Dan Accordino & Paul Flanders

“We’ve got to sell a lot more Whoppers,” deadpans Paul Flanders, left, with CEO Dan Accordino, to make the Carrols deal work. 

This story ends happily, as is likely obvious because Accordino is on the cover and their work is named Deal of the Year in this debut edition of the Franchise Times Dealmakers project. A visit to Syracuse, New York, Carrols headquarters for more than 40 years, reveals the opposite of the stereotype of Wall Street sharks in sharp clothes, wheeling and dealing. This CEO and CFO are working, in shirtsleeves and in humble surroundings, intently focused on making these new stores work.

Carrols has a tiny sign out front of its plain building amid blocks and blocks of senior living facilities. The entrance is plain; the walls are beige. Accordino is in his office today, a rare event because he’s an operations fanatic. 

“I don’t spend any time in the office. I was in 22 Burger Kings last week. Nobody knows I’m coming,” he says, and he checks the works: labor hours, cleanliness, time it takes to serve customers, food quality. “You can’t run these businesses without being in these businesses. You get a false sense of security.”

Accordino insists he knew what he was getting when purchasing the stores for a mere $16 million in cash plus a stock sale to Burger King corporate, which now owns almost 29 percent of Carrols’ shares and has two board seats. Total deal value was $60 million. He says he visited 205 of the stores before the purchase, and noted their performance significantly lagged the stores Carrols already owns. “We knew exactly what we were buying and we paid what they were worth. We won’t pay more than that,” Accordino says.

What he didn’t know was the inexperience of the managers, who are getting a crash course in the Carrols way—which is to “pull every one of our 587 restaurants every night,” he says, meaning the headquarters team examines a host of performance indicators, and then puts out calls to figure out why, when there’s a variance. For Carrols legacy stores, the average tenure of management is 21 years. With the new stores, the average tenure was seven months. “These kids couldn’t find the restaurants without a GPS,” Accordino says.

Lots of training, all those phone calls and visits, and replacement managers when necessary have yet to move results. “The only thing I’m disappointed in is the lack of sales response, even when we made very clear operational improvements,” Accordino says. “I would have expected the sales would have moved more quickly.”  Why didn’t they? “The hole was a little deeper in how they had disappointed customers.”

While Accordino runs around the country, Paul Flanders, CFO, stays back at the office. “I deal with the Street. I deal with the conference calls,” he says, noting before the Fiesta spinoff Carrols stock traded for about $5 or $6; after they announced the split it jumped to $8 and moved to $15 by the time it was completed. On this visit, “it’s north of 23 bucks,” he says about Fiesta stock, and the two combined trade for $28. (In the spin-off, shareholders got a share of Fiesta and a share of Carrols.)

Flanders is king of the one-liners, delivered deadpan, that stand in contrast to Accordino’s equally savvy yet more voluble explanations. “I think we got a pretty good deal,” Flanders says about the biggest acquisition of his career.  

That’s it—he had nothing more to say about a deal that drew admiration from the franchise industry in general and the Franchise Times 16-member judging panel in particular. 

What did he do when they learned the bonds sold? “We’ve refinanced at least seven times. We don’t get too excited about it,” Flanders says. 

How do they guard against paying too much? “We’re not emotional. When you’re doing deals you can get caught up in the moment.”

What was the impact on the company when they had to raise the interest rate, to 11 percent at the last minute, in order to sell those bonds last May? “We’ve got to sell a lot more Whoppers,” Flanders says—and then he stops talking, and just slightly upturns the corners of his mouth, indicating he knows his simple statement speaks volumes.

The last word goes to Accordino, who sums up the pair’s deal-making coup with a statement so low-key that Flanders surely approves. “Time will tell,” Accordino says. “So far this deal has potential but we have a long way to go.”

Boyne ‘paddling like mad’ before and after close

The name Boyne Capital stands for the River Boyne in Ireland, co-founder Derek McDowell explains, which by legend springs from the fountain of wisdom. “We figured when we started the firm we could use all the wisdom we could get,” he says.

Derek McDowell, Boyne Capital

“How are we going to get our hands around it, so we can hit the ground running,” is the key question for Boyne’s Derek McDowell.

He and Charlie Hanneman left their careers at large venture capital outfits to launch the private equity firm in Miami in 2006, and he laughs when complimented for the literary tale. “That’s what you get when you put two Irish guys together.”

The two Irish guys have spent the past year aggressively growing KBP Foods, the multi-unit franchisee of Yum! brands that Boyne Capital purchased about 20 months ago, betting on its CEO Mike Kulp and his management team’s focus on driving operational performance. (KBP stands for Kulp Boyne Partners.) 

Boyne also saw an approaching resolution of a large franchisee/franchisor lawsuit at KFC, which is owned by Yum! along with Taco Bell and others, and anticipated that Yum! would return focus and spending on growing the brand. “KFC is unparalleled in its category dominance. It is the largest player in the chicken category by far,” McDowell says, and he likes Taco Bell, too.

Boyne kept growth going at KBP Foods this past year, acquiring 53 KFC and Taco Bell restaurants in Atlanta from the franchisor; acquiring 46 KFC and Taco Bell restaurants in Norfolk and Richmond, Virginia, from the franchisor; and acquiring 8 KFC and Taco Bell restaurants in Atlanta from another franchisee. “We’ve grown from about 65 units when we started with KBP to over 190, and we’re going to continue to look to grow.” 

The pair started Boyne to acquire what McDowell calls “lower-middle market” businesses, those with $3 million to $10 million in cash flow, or revenue under $100 million, as he defines it. “It’s far more difficult to have a big impact on the $500-million revenue company, than the $30- $50- or $70 million,” he says.

With every acquisition, Boyne insists on a detailed plan for integrating an acquired business, a practice that stands out from many private equity firms. “There are some people who buy a company and say, ‘What do we do now?’ Our view is the integration and planning begins 60 to 90 days before we complete a transaction,” he says. 

The question his team asks: “How are we going to get our hands around it, so when we close we hit the ground running?” 

The process may sound like a well-oiled integration machine, but McDowell spins a different metaphor. “It’s a bit like a duck on a lake. It looks smooth, but you’re paddling like mad underneath,” he says.

One baby, one teenager adds to Buckhead family

Buckhead Investment Partners, a private equity firm in Atlanta started in 2008, invested in two companies last year, Tin Drum AsiaCafé and Tropical Smoothie—which Managing Partner Scott Pressly calls his firm’s baby and teenager, respectively.

Scott Pressly, Buckhead

“They have to know it’s coming from the heart,” says Buckhead’s Scott Pressly, about convincing founders to sell.

Both stakes—minority in Tin Drum and majority in Tropical Smoothie—were  purchased from the founders, Buckhead’s favorite type of seller. “I love dealing with founders, and I love growing businesses,” he says. “In my heart of hearts—I was a chemical engineer, so I love building things.” 

Buckhead prefers to provide $5 million to $15 million in equity capital to deals, an investment target lower than most private equity firms and aimed at the many owners of smaller companies often ignored by the mega-firms. 

Both deals took loads of persuasion, too, but that’s where the similarities end, because getting to “yes” required a deal structure and talking points tailored to the age and stage of each firm—as any parent discovers when that infant grows up.

Tropical Smoothie is the teenager, a 15-year-old franchise founded in Florida by Eric Jenrich and David Walker, who had built it to 300 units. “We had some thoughts to take this truly to be a national brand, but we had to change the way we did some things,” says Pressly—chief among them, move the headquarters to Atlanta. “You can’t build a national brand from Destin, Florida, because it takes three flights to get there.”

That type of change can be too painful for founders to execute, when they had started from nothing and built the company with friends and colleagues around their hometown. But while other private equity firms told the founders nice things, Pressly says he talked tough. 

“It was just being brutally honest with them. I think they appreciated that,” he says, adding he also painted a vision for the future over 12 months of dialogue. “We said, ‘This is your legacy. Do you want it to be a 1,000-unit chain?’ They have to know it’s coming from the heart, and you’re saying it for the right reasons.’’ 

Tin Drum AsiaCafe is the baby, started by Steven Chan. “Steven had never had a partner in anything, except his wife,” Pressly says, so Pressly’s task was highlighting what a partner could do—difficult for many entrepreneurs to see. “He had to believe that in giving up equity, his rate of growth would be more successful than if he did it on his own.” 

Pressly believes building trust is the key to acquiring companies from founders. “If you’re trying to gain a better advantage than the founder, it’s not going to work,” he says. “It has to work for the founder, for us and for the brand. When the founder realizes that’s how we’re looking at it, it works.”

Cypress offers hugs—or a slap—to resurrect deals

If The Cypress Group closes its latest deal this spring, founder Dean Zuccarello will credit a frank conversation he had with the buyers at a restaurant industry conference last fall. “I had to resurrect that deal. I had to grab the buyers and say, ‘What are you doing?’” when they became miffed at the seller’s actions and wanted to walk away.

Personal manhandling is the rule for investment bankers like the Denver-based Cypress, who work among all parties to push a deal through. “For people who think you can take numbers, send it out and the thing just closes—at least in my world that doesn’t happen,” he says. “There’s a lot of hand-holding and personal activity that you have to get involved in.”

Cypress had a busy year in 2012, “probably the highest we’ve ever had” in deal volume, he figures. Cypress aided Burger King corporate in franchise restructuring work; aided Carolina Restaurant Group, a Wendy’s franchisee, in selling a market and recapitalizing the company; aided franchisee Tom Garrett, formerly an Arby’s executive, in acquiring the Atlanta market from Burger King; aided the sale of Texas Steakhouse to CB Steaks; and more.

Cypress transactions range in size from $15 million to $250 million, and he ticks off some numbers without specifying which deal is which in the past year. “We’ve done one or two deals over $200 million; we had one that was $135 million; we had a couple that were $80 million; we had a couple that were $15 million.” 

Zuccarello also lists many roles that go along with investment banking, and cites “patience and perseverance” as the No. 1 quality required. “For many of our clients this is the biggest deal they’ve ever been involved in. Because of that, it’s emotionally charged,” he says. 

“We’ve got to be psychologists and babysitters and hand-holders, and we have to know when to put our arm around the client, and when to slap them in the face.”

Fortified with IMC’s capital, Fleet Feet starts new race

"I’m glad to have the transaction behind us, because it bolts you to your desk for a time,” says Jeff Phillips, CEO of Fleet Feet Sports, the franchisor of running specialty stores based in Carrboro, North Carolina. “I’m enjoying getting back out and doing my job, which is visiting with franchise partners and vendors and franchisees.”

“The transaction” was a doozy for Phillips, who engineered a management-led buyout last May from majority shareholder and founder Tom Raynor, with Investors Management Corp., the private equity firm in Raleigh, North Carolina, providing capital and expertise and wiping all debt from Fleet Feet’s balance sheet. The deal is pegged under $50 million in value; an exact figure was not disclosed.

Adding headaches to the deal—and drawing commendation from the Franchise Times Dealmakers judges for pulling it off—was the buyout of an Employee Stock Ownership Plan, or ESOP. Such buyouts involve sign-off by independent trustees, valuation firms and administrative protocol “that makes them extremely complicated to close out. We had to get up every day and stay focused on moving the deal forward,” he says.

The management team remained intact at Fleet Feet, a point that Phillips emphasized when meeting with nervous franchisees after the deal closed, and many executives increased their investment stake in the firm as a nice show of confidence. 

IMC, which also owns Golden Corral, provides management guidance to Phillips, and “puts us in a position to make acquisitions that we would not have been able to make.” The first came in February, when Fleet Feet bought an independently owned running store in Little Rock, Arkansas, and put two promising employees in charge. If Noelle and Sean Coughlan hit financial targets over the next five years, they will be in a position to purchase the store—another key tactic for Fleet Feet as it seeks to grow new franchisees from within.

“You have to be patient but diligent about moving a deal forward,” Phillips says. “We’re a running company, and the metaphor for us was getting across the finish line.”

After acing trio of deals, Metronome’s on the map

Metronome Partners is only 2 years old, but a pair of plum assignments for Ace Hardware Corp. last year puts the Chicago investment bank on the map. 

After years heading M&A divisions for other, larger firms, “friendly competitors” Jeff Rosenkranz and Randy Karchmer decided to team up and start their own. At the larger firms, they were “less down in the trenches doing what we like to do—getting knee-deep in the transactions,” says Karchmer.

Jeff Rosenkranz, Metronome Partners

Jeff Rosenkranz of Metronome Partners closed with his co-founder two complex deals for Ace Hardware. 

One of Karchmer’s gigs at the larger firm paid off, however. Ace’s CEO Ray Griffith sat on the board of a company that had been a Karchmer client. When Ace mentioned he was looking for a banker, the referral went to Metronome—and this was no ordinary gig.

Ace Hardware is well known for its 4,600 retail stores around the country. They also had a paint manufacturing division, which supplied the retail stores—but Ace thought they could gain more value. “They hired us to not just sell the paint manufacturing business, but to find them a partner to maximize the paint value in the stores,” Rosenkranz says. “We crafted a very interesting deal that is transformative for Ace.” Valspar is that partner.

Next was the $88-million acquisition of Westlake Hardware, a chain of 85 neighborhood hardware stores in Kansas City. Those are the first corporate-owned stores for Ace, and allow the brand to pursue further acquisitions because a management team is in place to operate them. “Given the current structure of Ace, retailers who wanted to sell their stores, or retire, didn’t have that many outlets to do something. This gives Ace an opportunity to be an outlet for a retailer to sell,” Rosenkranz says.

A third transaction, a recapitalization for Le Duff America, the café bakery restaurant franchisor, frees up capital to allow for growth. Karchmer expects many more deals like that this year, as owners look to take advantage of rock-bottom interest rates. “It’s a very opportune time. The debt markets are exceptionally receptive to high-quality companies,” he says.

Why did they name their firm Metronome? “My wife always accused me of running like a metronome,” Rosenkranz says. “The real reason is we like the connotation of the long-term, consistent advice.”

Complex deals make work fun for Monroe Moxness Berg

Any business owner who’s ever complained about legal fees—and that’s probably everyone reading this Dealmakers package—might consider transactions from the attorneys’ side of the desk.

Transactions are more complicated than ever, especially with private equity firms more commonly at the table in recent years, changing the dynamic from the days when an individual entrepreneur and an individual banker shook hands. “Not all systems have realized as early as other systems what the best alternative is” for deal structure, says John Berg, a partner at Monroe Moxness Berg law firm in Minneapolis. “It requires a lot of discussion at the beginning about what the market is, what’s reasonable.” 

Add the mounds of documents required to track all the complex arrangements, which “surprises” new clients. And finally, mix in all the players involved. “There’s the buyer, seller, lender, franchisor, and almost always there are landlords and other people as well,” adds Randy Evans, also a partner at Monroe Moxness. “It becomes a challenge to herd all these people into the same place.”

Bring it on, they might say, if their diplomacy skills weren’t so finely tuned from years of negotiating deals. For transactional attorneys like Berg and Evans, at a firm like Monroe Moxness that specializes in driving franchise finance deals, work could be seen like a marathon game of Monopoly, only with real money.

Berg mentions one deal that stands out from the long list of those Monroe Moxness completed in the last 18 months. Potomac Family Dining Group acquired and financed 39 Applebee’s company-owned restaurants, and refinanced another 30 Applebee’s restaurants they owned. “In about two years or less they went from zero stores to 69,” Berg says. 

Evans cited Argonne Capital’s acquisition of 51 Applebee’s restaurants from CRC last May, as well as several financing transactions through the year for investor/lender Capital Spring.

But every deal is a good deal to these attorneys, the more complex the better. “They’re complicated to do and fun to work through. It plays to our strengths,” Berg says. “It’s been very interesting, very fun. It’s very enjoyable.”

No high fives yet for Roark Capital

"Very, very, very competitive,” is how Roark Capital’s Geoff Hill describes the bidding for Massage Envy. The Atlanta-based private equity firm won the year’s most sought-after brand last fall in an auction run by investment banker William Blair and consulting firm North Point Advisors on behalf of the seller, Sentinel Capital Partners.

 “They did a terrific job for Sentinel,” says Hill, who describes how in an auction, prospective buyers don’t learn much about how the process is going until the winner is announced. “Typically you don’t know when it turns in your favor. You just hear that they’re accepting your offer.” Bidders also don’t know exactly how much to pay, Hill says, and they base their bids on limited information.

Hala Moddelmog, Arby's

Hala Moddelmog, Arby’s president, works with buyer Roark Capital to grow.

The auction process also was in place for Roark’s other notable deal in the 18-month window comprising the Franchise Times Dealmakers project, its purchase of Arby’s—although that deal was far different because Arby’s needed a turnaround and Massage Envy was an enviable success. “We don’t run around and do high fives,” Hill maintains. “We’re excited and we’re glad, but that’s just the beginning of the work.”

For Hill, the moment of closing means the heavy lifting starts. “I’m an operator,” he says. “What I look for is how can this thing be a continually great business?” In Massage Envy’s case, that means working with CEO Dave Crisalli to augment two promising opportunities. 

First, the brand had just started operating retail stores, and Roark’s experience with multiple retail brands will help drive the effort. Second, Massage Envy will embark on an international push for the first time, and Roark-owned brands such as Cinnabon are already stars overseas. “When they’re ready, we have a lot of experience in that,” Hill says.

In Arby’s case, which Roark purchased when publicly owned Wendy’s wanted to spin it off,  “What we saw was a really, really great company that needed help, and needed focus, and needed a strategy,” Hill says. Roark is working with Arby’s President Hala Moddelmog to shore up her team, after selling off markets in Dallas and the Pacific Northwest, and hiring a consulting firm on brand positioning—“the whole sliced-fresh platform that we introduced” is the result.

“I think you have to look at it as a whole,” Hill says when asked about lessons he’s learned from the acquisition business. That includes “understanding the business before you buy it,” and once you get it, “executing on those things that you found out about in the diligence phase, getting quickly geared with the management team.”

Above all, temper the celebration. “You get a lot of praise and congratulations when you buy something, but that’s just step one,” he says. “I’d rather get the high five down the road when we create something.”

Although ‘heartbreaking’ to sell, Smoothie King lands in good hands, founder says

Steve Kuhnau was plagued by allergies and low blood sugar back in the 1960s, so he started mixing up smoothies, leaving out the dairy and adding protein, long before anyone else. “There might have been a couple hippies out there blending fruit,” he says. 

By the 1970s he decided to go into the health food business, inspired by the improvement in his own health, and by the patients he worked with as a nurse in a Texas burn center. “I started bouncing this off my customer base after I opened my first store. Before I knew it, I had 300 people showing up.” 

Steve Kuhnau, Smoothie King founder

Smoothie King founder Steve Kuhnau was ahead of the pack in blending up fruit-based drinks, here shown in the 1980s.

He also had a mission that would guide the development of Smoothie King Systems, the 600-unit operation based in Metairie, Louisiana, which he sold last year for $45 million as he neared his 65th birthday. “Since 1973 I have relentlessly tried to give my customer base an alternative to fast food, that they could use for a meal replacement or a snack.”

Kuhnau’s been getting offers to sell Smoothie King ever since he started franchising, in the 1980s, says Richard Leveille, vice president of development who worked for Kuhnau for more than 25 years and has stayed on with the new owner. “I remember the first guy who came in. We had about six stores at the time. He walked in, put his feet on the table and said, ‘I want to buy your company.’ We said, ‘We’re just getting started.’ ”

The interest intensified. “We’ve probably been contacted once a week by an investment company wanting to buy Smoothie King because they see the lines,” Kuhnau says. But nobody like Wan Kim had come along before with an offer to buy. 

Kim is the CEO of SKUSA, and until the deal closed last July he was solely Smoothie King’s largest franchisee, with more than 100 units in South Korea. While going to college in California, Kim became a Smoothie King devotee, and upon returning home, convinced Kuhnau to award him master developer status there.

Kim’s first task was explaining to fellow Koreans what a smoothie is. His second task was selling enough of them to pay for a location so prime it’s akin to New York’s Times Square. “Believe it or not, when I opened Smoothie King Korea, people did not recognize the word smoothie. It was a tough beginning,” Kim says. “We paid like $1.2 million” to open the location, “and at that time our monthly rent was over $30,000.” It all worked out in time. “Wan worked his butt off,” Kuhnau says. “The numbers he’s doing are unbelievable,” 

As the new owner of the entire system, Kim has moved his family to corporate headquarters near New Orleans, and is pumping energy and growth into the brand.  “I really think we can change people’s lifestyle,” Kim says, something he thinks is especially important in his new locale.

 “So you know how many great restaurants are here. After I moved to New Orleans, I told my employees there must be fat in the air, because you just breathe, and you get the weight,” he says. ““Let’s say I have a big meal yesterday. I have a lunch or dinner as a Smoothie King smoothie, and that’s how I try to balance myself.”

Kim says he’s grateful to Steve and his wife, Cindy, for choosing him. “Steve, he’s a founder, and he didn’t want someone to take it over and just play with it and sell it to some others. He was really looking for a person who carried his mission, and I showed him and convinced him that I’m not going to be the guy playing around.” 

Kuhnau puts it like this: “At the end of the day, after meeting with all these different people who thought they could do better, Wan Kim was the man.”

Kuhnau prides himself on keeping meticulous records, which came in handy when his outside attorney, Gaylen Knack of Gray Plant Mooty in Minneapolis, called him nearly every day with questions. The transaction included Wan Kim’s company, SKUSA Inc., as the majority buyer, and minority owners Standard Charter Bank of the United Kingdom and National Pensions Fund, the fourth largest pension fund in the world.

The detailed process didn’t completely numb the emotions that inevitably come when founders sell their creation. “With those sophisticated bankers in that part of the world—they asked every single question, dotted every i, crossed every t, and it was fun in a way,” Kuhnau says. “But as the company was slipping away, slipping away—it was heartbreaking.”

“It went too fast. That’s my first reaction,” Kuhnau says when asked to reflect on his 40-year devotion to Smoothie King. Then he adds the best consolation for any business owner: “I’m just so proud of where the brand is going.”

Crazy pace suits Sun Holdings’ boss

In only 10 months last year, Sun Holdings of Dallas rocketed from about 250 stores to 400, a breakneck pace that delights Guillermo Perales. He’s the CEO described as “a classic entrepreneur” by his real estate director. “He seizes opportunity where he finds it,” says John Watson, brought on last year to get the details done. “It’s been a crazy amount of activity in a short time.”

Perales confirms his operating mode when asked why he bought so many stores in such a short time—99 from Burger King in Orlando in June; 50 Arby’s in Dallas; 40 CiCi’s Pizza stores in Houston; plus selling stores in locations far from his two bases in Texas and Florida. “They approached us and I jumped at it,” he says, in the case of the Burger King deal in particular, but he’s always on hyper-drive.

Guillermo Perales, Sun Holdings

Guillermo Perales took Sun Holdings from 250 stores to 400 in 10 months. 

He recalls a phone conversation last December, with just 10 days to go before year-end. “By Monday, December 31, we have four more Popeyes to open, and five more Burger Kings to open. Everyone’s going crazy around here,” he said at the time. Reached again in March, he ticked off more deals: Closing the first week of January on the sale of several Golden Corral units, for one thing. Signing a 30-store development agreement with Popeyes, for another. It’s hard to keep up.

This year won’t be so torrid. “We’re probably going to do smaller acquisitions to consolidate the markets that we operate, and some development,” he says. “A little remodeling because we’re supposed to.” 

For financing, Perales has developed partnerships with regional lenders, he says. “They like the segment; we’re able to do little mortgage loans, even though some don’t have real estate.” Capital One, for example, is a Sun lender who’s “getting aggressive,” he says. 

He says Burger King has a good program for financing remodels, but otherwise cash may be tight. “The hard money to get is the remodel money,” he says. He’s never done a syndication before, or a loan provided by a group of lenders, “and we’re looking into doing one.” But he’s unlikely to seek an equity investor, Watson figures, because those come with a board of directors and rules that seem unsuited to his boss. “I hate to procrastinate,” Perales says. “We find ways to make it happen.”

‘God willing,’ Trinity Capital’s founder gets deals closed

The first big deal to come Trinity Capital’s way, founder Kevin Burke recalls, was a beauty: a massive Taco Bell restructuring in 2000, only six months after the investment bank started in Los Angeles. But Burke and his partners saw trouble ahead, as the franchisor, the franchisee, and the franchisee association separately tried to wrangle Trinity into taking each party’s side.

“We said, ‘No. There’s a lot of blood in the water right now and it’s not a time to get on top,’” says Burke, who is cited for Special Achievement in the Franchise Times Dealmakers project. “We said, ‘We won’t work for any one of you; we’ll work on the transaction.’ That threw everybody for a loop.”

It was a bold stance for a young firm, the kind that usually jumps at any business coming its way, and it succeeded—Trinity Capital worked on the project from December 2000 to February 2003. Burke says the stance laid the foundation for Trinity. “Our preference is to play nice in the sandbox,” he says. “We have good blessings from God not to put money before people, and we believe it was the right way to do it.”

Burke is an unusual financier in that he often makes Christian references, starting of course with the firm’s name. “I set an example. I don’t like to wear it as a badge,” he says about his faith, and if it resonates with people or not, fine with him. He cites a two-year sabbatical, taken after a decade working on Wall Street for the investment banker Dillon Read, when he spent time in Eastern Europe with the Franciscans, a religious order that follows the teachings of St. Francis. 

“I think the authentic gospel experience was what really shaped me,” Burke says about that time. “St. Francis has this quote: ‘Always preach the gospel everywhere you go, and only in extreme circumstances do you use the word.’ So, you don’t get on the soapbox and preach.”

Another influence was his upbringing. “I was raised overseas, in Bermuda, and a series of Navy bases all over the world: Japan, Philippines, Thailand. It shared with me clearly, foreign cultures doing things different, and I didn’t think how we did things had to be the best way.”

Nominators of Burke credit him with financial innovations, particularly the securitization of franchisee debt in the late 1990s. “This allowed a windfall of financing to restaurant franchisees,” writes Chad Spaulding, managing director at Trinity Capital and one of Burke’s nominators.

Another innovation was a bond offering for the state of Tennessee years ago, when Burke proposed using the state’s pension fund to guarantee the deal, rather than paying a bank to do so. “I proposed this, and everybody on Wall Street said, ‘No way.’ And I tried it and it worked like a charm,” Burke recalls. “Coming from a structured finance background on Wall Street, I had a lot of proclivity for packaging securities and looking for novel twists.”

Trinity Capital had its second biggest year in its history last year, with $500 million in transactions closed. He looks to a deal pipeline double last year’s at this point, so he expects another strong year. “God willing,” Burke says, “but you have to get them closed.”

About this project

Franchise Times Dealmakers is a new editorial project and awards event designed to highlight excellence by management teams, investors, lenders and advisers in buying and selling franchise companies to drive sustainable growth. 

Franchise Times called for nominations during the fourth quarter, seeking details and lessons learned from transactions closing from July the prior year through last December. Editorial staff narrowed the nominations to 25 finalists, which were presented to a panel of judges. Eleven were selected to win awards, and they along with the finalists are presented here.

Want to network with the Dealmakers? We’re throwing a gala awards party April 24, 5-6:30 p.m., for winners, judges, finalists, colleagues, supporters, service providers and attendees at the Franchise Finance & Growth Conference, at the Four Seasons in Las Vegas. Two panels April 25 will feature winning Dealmakers describing how they pulled off their deals. To register, visit www.franchisetimes.com

Nominations open October 1 for next year’s Franchise Times Dealmakers project. Contact Beth Ewen, managing editor, for information, at 612.767.3212; bewen@franchisetimes.com.

What the judges say

"As Calvin Coolidge once said, ‘persistence and determination alone are omnipotent,’ and the fact that some of these deals got done at all proves the point.” 

So writes one of the judges for the first Franchise Times Dealmakers project, a group of experts we asked to fill this important role because of their financial expertise, experience with transactions and all-around business savvy.

Judges reviewed a packet of 25 finalist nominations, considering the criteria of deal complexity, impact on company performance, and strategic significance. They then discussed the deals during a conference call in which the merits were fervently debated. “We came to different conclusions because we viewed the transactions through different lenses,” is how one judge described it.

Judges ranked the nominations 1, 2 or 3, with 1 being outstanding, and thus identified 11 dealmakers that stand above the rest. Finally, they were asked to name the Deal of the Year, which generated another round of diverse comments that solidified around Carrols.

Many judges praised all the finalists for guts and gusto. “The sheer variety in types of deals, sizes, franchisee and franchisor deals, and creativity shows that it is not just money coming back into the market, but strategies and creative investors and executives,” one judge concludes. John Hamburger, Mary Jo Larson and Beth Ewen of Franchise Times also served as judges.

Franchise Times thanks the judges for their service, and for nominating deals, suggesting deals to pursue, encouraging others to nominate deals, and especially helping to develop this new annual project.  

Dealmakers Judges

(Left to right) Bob Bielinski, The CIT Group, Robert Daniel, Regions Bank, Bill Edwards, Edwards Global, Ron Feldman, Franchise America Finance, Chris Kellher, Auspex Capital, Mark Kirsch, Gray Plant Mooty

Dealmakers Judges

(Left to right) Jeff Kolton, Franchise Market Ventures, Cristin O’Hara, Bank of America, Dennis Monroe, Monroe Moxness Berg, Armando Pedroza, RBS Citizens, Michael Seid, Michael Seid & Associates, Dean Zuccarello, The Cypress Group 

Worthy Contenders 

The following 12 companies are finalists for this year’s Franchise Times Dealmakers project, selected by our editorial staff from dozens of nominations and presented to our judges. Although not named as award winners, they show smart and creative deal-making and demonstrate a variety of savvy ways to drive corporate growth.

Brentwood Associates sells Pacific Island Restaurants, including 38 Taco Bells and 45 Pizza Huts in Hawaii and Guam. “It’s great to complete a successful exit for our investors, and a lot of the company’s employees gained a lot too,” says Rahul Aggarwal, managing director.

Casual Restaurant Concepts sells 51 Applebee’s restaurants in Florida to Summit Restaurant Group, an Argonne Capital affiliate. “The main challenge lay in melding the culture of an owner-operator, who has spent his life in the Applebee’s system, with that of the sophisticated financial buyer,” says nominator Monroe Moxness Berg.

Dogtopia attracts an investor, Peter Thomas of Thomas Franchise Solutions, which pays $2 million for a 50 percent interest from founder Amy Nichols. “The biggest challenge was with the founders, getting their trust and confidence to share their baby,” Thomas says.

Franchisee DWO sells 18 Denny’s locations in Seattle to Alancaster Corp., another franchisee. “It was a very elegant result for the seller and an incredible opportunity for the buyer,” says nominator Trinity Capital.

Kona Ice truck

A Kona Ice truck serves customers. Kona Ice is one of 12 finalists for  the Franchise Times Dealmakers project.

Fresh to Order inks an eight-store deal, its first multi-unit agreement, with an experienced Orlando operator, Giriam Patel. “In developing a new concept you always have to look ahead and see what people want,” says CEO Pierre Panos. “Once you’ve got the first multi-unit deal, things become much easier.”

Kona Ice buys back four shaved-ice trucks from two franchisees, in order to demonstrate to franchisees how best to run a multi-unit business. “Franchisees’ dreams don’t always match the franchisor’s plans,” says President Tony Lamb. “We had thought franchisees would be content with two or three trucks, but many have turned out to want more. We need to make sure we are out in front of them.”

The McLean Group advises SH Franchising, also known as Senior Helpers, in its sale to Levine Leichtman, and advises Fast-Fix Jewelry in its sale to Pine Tree Equity. “A key takeaway is that the McLean Group continued to see a strong interest by investors in growth franchisors,” says Burt Yarkin, managing director.

Mitra QSR and Chalak Growth Capital Fund buy 120-unit Yum! portfolio of KFC, Taco Bell and Long John Silver’s. “The acquisition puts us in a strong position for future growth in other markets by providing the scale and footprint,” says Pushpak Patel, Mitra’s co-CEO. 

North Castle Partners buys Curves, 100 percent owned by founders Gary and Diane Heavin.”Our franchisees are learning a new management style and a new value proposition, so there are lots of challenges in transitioning a business—all going well,” says Jon Canarick, managing director.

Potomac Family Dining Group acquires 39 Applebee’s company-owned restaurants from DineEquity in North Carolina and Virginia, more than doubling the buyer’s size. “As a result of the deal, DineEquity has transformed Applebee’s into a 99 percent franchised restaurant brand,” nominator Monroe Moxness Berg points out.

Snap Fitness buys Kosama, a fitness company offering group boot camps, to add to its 24-hour health clubs. “Don’t be afraid of a changing marketplace,” says CEO Peter Taunton. “Listen to your customers, recognize the trends, and find new ways to provide value.”

Team Schostak Family Restaurants buys all corporate-owned Applebee’s restaurants in Michigan, 65 total and doubling the franchisee’s unit count. “A hands-on mentality of sophisticated franchisees and local area expertise facilitates successful expansion,” says nominator Trinity Capital.


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