With 94-Unit Denny’s Deal, WKS No. 1 in Three Brands
WKS Restaurant Group out of Cypress, California, is now the largest Denny’s franchisee in the system. The new location-count leader took the crown by adding 94 restaurants that formerly belonged to QK Holdings.
WKS, which was No. 36 on this year’s Restaurant 200, now has 127 locations across 10 states. It also acquired two Arizona support centers and brought along the entire staff to support the entire group of restaurants.
Founder and CEO Roland Spongberg is no stranger to being No. 1. WKS is also the largest operator in El Pollo Loco and Krispy Kreme. And it was actually by way of an El Pollo Loco acquisition that the company got into Denny’s in the first place.
“In 2004, I had a friend of mine, an El Pollo Loco franchisee, I had about 35. He had four El Pollo Loco and a Denny’s. We talked about an acquisition for three months and I said, 'I don’t do any Denny’s;' he said, 'it’s a package, it’s all or none.' So I said let's go,” said Spongberg. “We bought this Denny’s in Fontana, California, and it was a good Denny’s, doing about $1.9 million. A few months after it was $2.5 million; we said our formula works so let’s keep doing it.”
Overall, it was not an ideal time to jump into the concept, but after some tricky years, the system as a whole began an eight-year same-store sales growth streak beginning around 2011. Spongberg said through those tough years and on through the new golden era for the concept, his focus was people above all else.
“I learned a long time ago that I’m in the people business,” said Spongberg. “Our whole operation is built around a platform where we try to help the GM the best we can, the GM has 100 things to in a day and has time for 50, but we can do the other 50 for him through accounting and systems and training,” said Spongberg.
He said while the FDD is still monumentally in favor of franchisors, his scale and operational philosophies did help him secure the deal, but it was still no breezy acquisition. In all, it took about 13 months of stops and starts to get QK, which was No. 76 on the Restaurant 200, to the signing table. Denny’s however, was eager to have them grow.
“I think our relationship with Denny’s was such that when we talked with them, they were very much in favor of the deal because of how we run our restaurants,” said Spongberg.
He said it’s quite early, but they’ve blown their 3 percent bump with the WKS systems out of the water already. Spongberg said they’re about double that already just three weeks in.
Backing the deal was Wintrust, which had purchased WKS’s original debt from GE and retained one of the company’s original bankers as well. That relationship and some experience with acquisition of some Wendy’s restaurants last year in an all-stock transaction helped a lot. The Denny’s deal was also a stock sale as opposed to an asset sale, so a little experience with S corps was handy.
As for the future, Spongberg said the company committed to about 12 remodels a year, updating the restaurants to the new Heritage 2 prototype. In all, it was a great deal for everyone. QK’s CEO Doug Koch is retiring, but will be helping Spongberg and the team in a consulting role.
“We love the deal. Doug Koch did a great job running the company, he’s retiring and we’re very grateful he gave us the opportunity to buy. And slow and easy we’ll make some changes, but we love the opportunity,” said Spongberg.