Business Valuations

What Do the Following Companies Have in Common?

This is just a partial list: Church’s Chicken, Uno Chicago Grill, Charlie Brown’s, Domino’s Pizza, Burger King, Cinnabon, Sizzler.  The first response would be that they are all in the food business, and that’s correct.  Now name the second thing that they all have in common?  Give up?  Well, they (and many others) have been purchased by private equity firms.  And, apparently, this is just the beginning.  The huge Dunkin Donuts chain is being sought after by two or three private equity firms.

Why the interest in restaurants from groups that most people associate with high tech?  Many firms got burned during the dot com and high tech meltdown.  Now these same private equity firms are looking at businesses that are stable, with more predictable earnings, and that are also very familiar businesses, time-tested and still have a lot of growth ahead.

One industry expert said in Nation’s Restaurant News, “What’s really driving this is the success of these deals, the numbers that the private equity companies are getting when they sell…”  For example, he noted, “Restaurant Associates bought Charlie Brown in 1975 for $3 million and sold it to Castle Harlan seven years later for $50 million.  Castle Harlan got almost three times that price – an appreciation of $90 million with the sale to Trimaran.”

If private equity and similar firms are now buying restaurants, what businesses are next?  If you are the owner of a small growing company or chain of businesses – is a private equity firm in your future?  A professional intermediary may be able to answer that question for you and if you are considering selling – they can also help.

Leave a Comment