Investor Group Buys DQ Franchisee

Eagle Merchant Partners is getting into Blizzards.

The Atlanta-based private equity group, which specializes in mid-market acquisitions, has purchased Vasari, LLC, the second largest franchisee in the Dairy Queen system. It is also the largest franchisee based in Texas.

The deal, closed earlier this month, involves 74 units in three states, all but three of which are in Texas. Most of them are around Dallas-Fort Worth, Houston, Austin, Waco, East Texas and the Panhandle region. In addition, the deal includes the rights to develop 16 locations in the Dallas-Fort Worth area.

Eagle Merchant plans to remodel and modernize 70 of the locations over the next five years.

This is a pretty typical deal nowadays. Private equity groups have been eagerly buying into the restaurant business, lured by the industry's stable cash flows and proven business model. And QSRs represent the largest portion of the restaurant business, with sales in 2013 expected to total more than $188 billion. Eagle Merchant also notes that QSRs as an industry has grown 20 percent since the recession.

Eagle Merchant is familiar with the restaurant business, and some of the firm's partners have been involved in various restaurant acquisitions and investments with different private equity groups over the years, including Krystal, Church's Chicken and IHOP franchisee ACG Texas. Eagle Merchant partner E. Stockton Croft, for instance, is still on the ACG board. Croft was a founding partner of Argonne Capital and also spent time with the private equity group Arcapita.