It happens all the time in the merg ers and acquisitions business, but never so late in the game in Auspex’s experience, and El Rancho’s owners had to wrap things up by year-end.
So Auspex quickly turned to a long-time client, MUY Brands, operated by Jim Bodenstedt in Texas, and con- vinced him to take a look at the $80 million deal.
Auspex raised the capital to fundthe deal, including securing new senior debt from GE Capital Franchise Finance, and at the same time sold three companies for MUY—shedding two brands Bodenstedt viewed as low growth (Long John Silver’s and KFC) and trading up to the high-growth Taco Bell brand with geographic diversity.
“We were able to quickly change gears and find a new horse,” says Chris Kelleher, managing partner at Auspex, because Bodenstedt trusted them and was able to say, “OK, I’m not going to spend a whole bunch of time going through this; I’m going to trust the representation made by the sell-side broker.”
Sentinel walked away from the deal November 2, 2012. MUY entered the picture November 3 and “needed to not only close a 76-store deal includ- ing 23 properties in about six weeks, but also complete the divestiture of three separate businesses to raise the equity to do the deal,” Kelleher recalls.
“It was a lot to get done in less than 60 days,” Kelleher says, and he cred- its the speed to “lots of hard work and experienced dealmakers at all levels of the transactions.”
Such confidence comes in part from careful analysis, an Auspex hall- mark. “We’re not a flashy group. You kind of get what you get,” Kelleher says. “We pride ourselves on doing deep financial analysis and that cre- ates a level of confidence. They know that we’ve thought through all of this.”
]]>Then there are the Engler brothers, and those like them, on the other, who prefer to retain the real estate because it allows flexibility if, say, a once-promising trade area goes bad.
Brothers Jeff and Lee Engler, who operate Border Foods of Minnesota, “have a very long-term focus,” says Chris Kelleher, the partner at Auspex Capital that led a recapitalization deal to follow their wishes. “They’ve passed this business to their kids, and they wanted to retain their real estate and grow their portfolio. They want to invest in the remodels and then have the growth in sales from the remodels go to them, rather than a landlord.”
The problem, as Kelleher and his Jeff, left, and Lee Engler are brothers and Taco Bell operators, whom Auspex Capital advised for a $263-million financing that kept their real estate separate from their restaurant operations. partner, Naveen Goyal, found, was that financing real estate as part of an overall deal had fallen out of favor post-2008. “So the lenders were basically forcing operators who own their real estate to divest it,” Kelleher explains, which is where he and his partner got to work, getting meetings with any bankers who would listen to convince them to finance the restaurant business separately from the real estate.
“We’ve been pushing on the lending community for several years to look at it a
little bit differently, to pull the restaurant business out separately, and then finance the real estate separately,” he says. “This allows them to de-leverage the operating company, and put some more amortized debt on the real estate company.”
They haven’t convinced everyone, Kelleher concedes. “We’ve gotten a lot of resistance, but we’ve been very persistent and we’ve been very analytical, and we’re gradually getting the banking community convinced.”
Rather than being an innovation, the tactic is actually back to the future, Kelleher says, meaning this was a typical financing method before it fell out of favor. For large operators in legacy brands with heavy remodel requirements, in particular, it’s a welcome option, and one that Auspex will keep pushing back into the mainstream.
In fact, that’s his lesson learned. “We’ve got a lot of people that turned us down and they said that’s a bad idea. And we’ve pushed and pushed, and we’ve gotten some traction,” Kelleher says.
Reprinted with the permission of Franchise Times, April 2017 © Franchise Times, 2808 Anthony Lane South, Mpls., MN 55418
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“It’s a lot harder to unwind a company than to build a company,” declares Tuohy, the protagonist with his wife, Leigh Anne, in the 2009 hit movie “The Blind Side,” about their adoption of Michael Oher, a homeless African-American kid they saw on the side of the road, wearing cut-off jeans and a T-shirt in the bitter cold.
Oher went on to play NFL football for the Baltimore Ravens and the Carolina Panthers, and Sandra Bullock played Leigh Anne Tuohy in the movie. Tuohy downplays the initial encounter with the 16-year-old Oher, which perhaps explains why he’s a no-nonsense restaurant oper ator who leaves the dramatic stories and impassioned statements to his wife.
“It wasn’t that big of a deal. We just happened to pass him,” and then his wife ordered him to stop. “Leigh Anne told me to pull over. I’m very coachable. It’s a theme of my life.”
As for divesting his restaurants, includ ing 28 KFCs to his longtime operating partner Michael Roe, whom he calls a superstar, it’s a process. “You can’t just walk away. You have to stairstep it down. There’s people involved. I thought, turn the lights off and you leave,” but no such luck.
His wife’s younger brother got him into the game three decades ago. “He had a good night, and he couldn’t find a Taco Bell,” says Tuohy with a laugh. He bought one Taco Bell restaurant in Meridian, Mississippi, a four-hour drive each way every day, which corporate said was challenged. “It was a euphemism” for underloved. “I loved it to death,” he says. “It was mine. I enjoyed cleaning out the grease pans” and sweeping out the dirt.
“It was my dirt. I was responsible for the dirt.”
He and Roe grew the business to 115 Taco Bell, KFC and Taco Bell/KFC co-branded units in six states, seven Freddy’s locations and the real estate underlying 64 of the restaurants. On the advice of Auspex, he retained 11 Taco Bells, all in the beautiful and warm Florida Panhandle, something he advises others to do.
“I would recommend not getting out” all the way. “I would recommend get
ting to a comfort level.” Chris Kelleher and Naveen Goyal, his advisers at Auspex on both the ride up and the divestment down, told him over eight years to con sider the emotional as well as the financial aspects. “Your competitive nature, there will be a vacuum,” he recalls Kelleher say ing.
So which do the folks at Auspex like better, the ride up or the ride down, I asked, and they couldn’t come up with a pat answer. “It’s kind of bittersweet,” says Kelleher, when the client’s portfolio is sold. “We’ve had a long relationship with Sean. I went to his daughter’s wedding. When I go to visit him I stay at his house, and that relationship is going to be not as close,” he says, although he knows it won’t completely end. “I still talk to him all the time. We enjoy the relationships and that’s what we build our business on.”
Adds a philosophical Goyal: “It’s part of the journey. They’re going to have to build until it’s time to harvest.”
And then there’s this: “When you sell you make a lot more money a lot quicker.” One thing Tuohy does enjoy post sale is a big pile of cash. “There’s nothing wrong with that,” he says, especially because “I’ve never had that before.” His father was a schoolteacher and coach and his wife’s father was a police officer. “People who say money isn’t important are the people who have it.”
Besides, it’s been a long time com ing. “I think we started out negative,” he said, referring to cash on hand, and money stayed tight most of his career as he poured back equity into buying more restaurants, and adding debt with each transaction.
“People like myself who grow wealth through leverage,” because they don’t have any capital to start with, “you’re fighting the leverage the whole time.”
Even though your top line keeps grow ing, “your bank account doesn’t show it. I kept telling my wife, ‘We’re doing great.
We’re doing great,’” he says, but she wasn’t feeling or seeing it.
“I was five days from bankruptcy twice,” he said, in the year 2001, and he remem bers the time frame clearly because the company’s massive restructuring doc ument he and his vendors and bankers had worked on for months literally got destroyed on 9/11. “The last signature was someone in the World Trade Center,” he says, so the entire restructuring had to be postponed for a later date.
How did his operation get in so much trouble back then? “It was going down the cafeteria line, and my eyes got bigger than my stomach.”
At one time he had as much as $70 million in leverage on a $200 million operation. Did that make him nervous?
“It didn’t when I was 38. At 59 you don’t know how much rebound time you have. At 38 I had all the time in the world.”
The basketball metaphor isn’t an acci dent. Tuohy got a basketball scholarship to Ole Miss, also known as the University of Mississippi, after he went to an out standing high school, Isidore Newman, because his father taught there and his tuition was free. He was not a standout student. “I tease everybody, I made the top half of the class possible. I was just a meathead trying to get to college on a basketball scholarship,” he says.
“I was undersized and under-talented and we weren’t very good when I got there,” he says, but Tuohy led the Ole Miss Rebels to their first SEC men’s bas ketball tournament championship in 1981. A point guard, “I played by fear that I was going to get run over,” but many of his records still stand.
Leigh Anne was a cheerleader for the basketball team, and they got together. “She said it was because we had short shorts back then,” he jokes. If they had worn the long, baggy shorts with the leggings like today, forget it. “I am the
example—if people give you a chance,” something good can happen.
The sentiment was bred into him by his father, Tuohy says, a beloved coach whose players still say decades later that the elder Tuohy lifted them up.
When the couple met Oher, the idea became action. “It really was the underly ing basis for our developing a relationship with Michael. We couldn’t understand why people valued him the way they did,” he says. “People are so undervalued. When given the opportunity, people can do wonderful things. It’s the foundation by which this whole world is flawed or existed or has prospects.”
Oher just retired from the NFL at age 32 but Tuohy isn’t worried that he will go broke like other young athletes. “He’s not
one of those. He’s very smart. He’s very frugal,” and he’s been that way all along. “When he came here, that’s who he was. We just didn’t screw him up. We just gave him an opportunity.”
Both with his children and with his employees, he’s tried to follow the same path, “that came to me by DNA.” His style is “maybe a little hands off for peo ple. You have to allow them to get there,”
he says. “I’ve tried to let people become who they’re supposed to be. It’s a harder avenue than the other one. The people who are like me,” meaning restaurant operators, “we are control freaks.”
He closes with advice for other own ers in the same spot as he—find advisers and listen to them over your career, as he did with Auspex Capital. “I know then and I really know now that I couldn’t do it without them,” he says. “The problem that people have who are at this level I was at, there’s nobody to ask that ques tion of. That’s why Auspex was important to me.
“We don’t have boards. We don’t like to listen to anybody,” he says. “That’s when it changes, when you start listening to someone.”
]]>“A combination of an over-leveraged acquisition and the impact of two devastating wild fires that completely destroyed two restaurants and severely disrupted the local economy left the company illiquid and insolvent,” investment banker Auspex described in its nomination form. “To make the situation even more bleak, the company’s existing senior debt was maturing in less than a year. Management was forced to fire sale five restaurants in the spring of 2019 to raise cash but the proceeds were not sufficient to bring taxing authorities and other creditors current or fund franchisor-mandated remodels.”
Or as Hennan said: “It was really like fixing Humpty Dumpty. How do we break this down and rebuild it, to not only something that was sustainable but how can we grow?” He scheduled a lunch with Chris Kelleher and Naveen Goyal, two principals at Auspex. “What were the needs of the organization, and how do we stabilize things?” was the topic of the lunch, Hennan said. “We had some internal finance issues, processes that weren’t good, they were in fact bad. We didn’t have the systems in place to raise the warning flag: You have cash flow issues. How do you see it on the horizon, not on your doorstep?”
After a comprehensive analysis, Auspex recommended and management agreed to a two-step recapitalization process. The first step was the placement of $3.5 million in unsecured mezzanine debt with Redemption Capital to stabilize the company’s finances. About four months later, Auspex completed the placement with Fifth Third Bank of $26.5 million in new loan commitments, including a $19.5 million senior secured term loan, a $6 million development/remodel line of credit and a $1 million revolving line of credit.
And now Hennan and the team are off and running again. “Oh absolutely,” he’s ready to start growing, Hennan said, and reinvesting back into the portfolio. In the next six months they’ll tackle four remodels and then begin filling in. “Our geography is gigantic,” stretching from Sacramento into Oregon. “We believe we can fill in the middle, and we actively have a commercial real estate agent poking and prodding,” he said.
Hennan is the only non-family member on the J.A. Sutherland management team, and he is keen to see founder Janice Sutherland recognized as a 44-year pioneer in the Taco Bell system who started with one store. Her father was a veterinarian, and the family is “extremely” tied to 4-H and Future Farmers of America. Whenever they build a Taco Bell, they have to get a variance to make the drive-thru tall enough to accommodate horse trailers.
“You would love the family here. This organization is jeans and boots and Dodge Ram trucks,” he said. “I’ve known the family for 20 years, just from afar,” when he worked for another large Taco Bell franchisee. “It was always interesting, because they’d always travel together. It was a pack of Wrangler jeans and boots. Jan is, I don’t know, 5-foot and 74 with gray hair, and she gets up and down off of the ground and out of her giant Ram truck better than I do at 48. She’s one of those people that believes if you stop moving, you’re dying.”
Hennan is excited for the day the company is thriving once again. “Jan giving up operational control, she’s been a franchisee 44 years. I had to come in and build trust. She gave myself and my family an opportunity to do something I’ve dreamed about, and for that I’ll forever be grateful.”
He wants to pay her back. “I want Jan to be celebrated as the founder, with tens of thousands of employees. We provide a first-chance opportunity,” he said.
]]>“It literally has an indoor ski jump,” not to mention a rollercoaster, said Chris Kelleher of Auspex Capital, who engineered the merger.
The Auspex team faced a challenging situation, advising Wenesco, a New Jersey-based Wendy’s franchisee, after the death of its 80 percent owner.
“The fact that they were trying to do so much at the same time: buying out the widow and merging with the other entity, that was a big challenge,” Kelleher said. “Obviously there’s a whole other set of lawyers, and obviously their interests were in protecting the widow,” who did not want to carry a loan to fund the majority stake but rather “wanted to move on with her life.”
The other problem, said Kelleher: “The capital stack, the debt and the equity that we refer to, there was a shortfall,” he said. “The problem was, it wasn’t big enough to garner attention from major institutional mezzanine or sub-debt players.
They usually want $10 million but we only had $2 million” to cover. Woodside was the linchpin in the deal. “When I sat down with Kevin it was very apparent very quickly that this was a great operator. That was the important thing,” Kelleher said. “There was the loss of the face of the firm, but the guts of the firm were still there. He would sit with the bankers and knew every detail of every store,” which convinced the incumbent lender to stay on.
Woodside said the new partnership is going “very, very well. Phillip and I had known each other for a good seven years or so when he came into our Wendy’s system. It’s a little bit of a mentorship. After my partner of 20 years had passed, and looking at options on how to regroup the company—I didn’t want to sit on it, but grow it.”
The company has 18 operating Wendy’s restaurants, with number 19, the Wendy’s in the American Dream project, set to open in March. If it happens as planned, it will be a long-time coming.
“We’ve had that lease for the American Dream, back when it was called Xanadu, since I think 2005, the original version of that. That’s a project that had multiple developers fail and go under, it collapsed under its own weight.
Triple Five came along and said we know how to fix it. Let’s make it bigger.
“We’re built to grow, and the way we see it is, we owe every high performer a career, not just a paycheck,” Woodside said. “Business has been very good to me and others like me, and as much as my mentors have helped me out, we want to continue the trend. We’re all about growing the future leaders.”
]]>Bodenstedt kept it simple. “What is the price? How did I get to it? What is the equity I have to put in? Am I going to make money and how?” His goal was to present a deal he knew could get done in six months, before Congress changed the capital gains rate (as people feared but never happened) and employees worried too much about their future. Multiples of cash flow were likewise non-negotiable: “Taco Bell, 9. Wendy’s, 7. Pizza Hut, 6,” take it or leave it, he declared, then described the typical auction process with disdain. “Fifty books. 10 bids. Five highest offers. Three best of offers. And a buyer.” What a waste of time.
“I don’t go fishing, I go catching,” said the almost life-long Texan who sold all his property in San Antonio and is relocating to Europe. “I don’t go to try to sell my business. I go to sell my business.”
For Bodenstedt’s longtime investment banker, selling 85 Taco Bell, 352 Pizza Hut and 318 Wendy’s restaurants in six months seemed a “nearly impossible” task, said Chris Kelleher of Auspex Capital. Not to mention 25 fee properties, the corporate office and the corporate aircraft for an aggregate price “well in excess of $1 billion. It was the second largest QSR industry M&A transaction ever,” the nomination form said.
As a result of the acquisitions, Shoukat Dhanani and his newly formed company Ayvaz Pizza became the second-largest franchisee in the Pizza Hut system; he’s also a giant Popeyes and Burger King franchisee. Sentinel Capital Partners is the financial backer.
His brother Ali Dhanani, of HAZA Bells and HAZA Foods, bought all of Muy’s Taco Bells and about half of the 318 Wendy’s. He wanted to buy all the Wendy’s but corporate has an “unwritten his great leadership and trust, was essential to the success of the deals,” the nomination form said, but during an interview the conversation about meeting the deadline turned playful. “Were you cracking the whip?” I asked Bodenstedt. “Two whips in each hand,” Bodenstedt joked. “Several of them. Several of them,” said Shriram Chokshi of Auspex Capital.
Bodenstedt praised the team at Auspex Capital. “I made a mistake early on,” buying a group of restaurants without the proper diligence, and he learne from that experience not to diagnose his own illness or prescribe his own meds. “I don’t draw my own blood. Experts do what they do and that’s what Auspex does for us,” he said. “Deals come up spontaneously, so you have to be able to respond spontaneously,” and the client and investment banker executed 84 total transactions, including about 40 restaurant acquisitions, over his career.
The turning point for Muy Cos. came in 2010/11, “when we rounded out our team,” with a chief legal officer, a chief information officer and other executives. Bodenstedt believes in giving equity to people far deeper in the ranks than just the top three or four officers. “Our CIO, CFO, chief people officer, directors of ops, second in commands, chief pilot. Seventeen people, and they all became millionaires at the end.” When other operators came calling with job offers, “our team had a higher net worth than the people trying to hire them,” he said.
Bodenstedt, age 55, is one of former President Trump’s largest campaign contributors, giving more than $400,000 to his reelection campaign for 2020. He at first thought he’d sell his restaurants a few years from now. Why? “Because this business has a certain pattern. People are growth-minded” at first. “Many people become less risk-tolerant and stop growing and then the organization starts to lose value.”
Then when President Biden took office—Bodenstedt is not a fan—and Congress talked about raising capital gains taxes, he called the executive team together and presented the case for selling the business now. “My recommendation was, if you’re ready to go, I’m ready to go. Everybody raised their hand,” Bodenstedt said. “I’m proud that everyone made the decision together and we executed.”
Asked how it feels to exit his life’s work, he said, “I always approached the business as, we never really owned the business. We just borrowed it. I feel really good about our stewardship. I’m not an entrepreneur. I’m anti-entrepreneurial. I’m lazy, if you would. I just put together the team,” he said.
Asked about the low point at his company, and he answers immediately. “Friday, March 13, 2020. The day America closed down,” he recalled. “My Northeast restaurants were the canary in the coal mine.” On or about March 11, they had a call. “We would draw down all of our lines of credit because when you need money you can’t access It was a really good decision. I was in contact with David Gibbs,” the CEO of Yum Brands, each of his brand presidents, “the governor of the state of Texas and the White House. By the morning of the 16th we put in a plan to conserve cash,” he said.
That day “has been the worst day of business ever. I was concerned I would not have a business, out of my control.” At a Harvard Business School course, “I heard this: Companies never fail they just run out of money, and I thought that could happen to me.”
How does he feel after his mic drop? “I started at McDonald’s at minimum wage,” at age 18, and now his restaurants sold for more than $1 billion. “It’s not the minimum wage business. It’s the maximum opportunity business,” he said. “I certainly love what I did. I’ll miss the people I interacted with. Life goes on,” he said. As if on cue, up drives his former chief people officer in a brand new Porsche 911 Turbo.
So Muy’s newly minted millionaires aren’t saving their money? “They’re doing all they can do to help with that inflation,” he said with a laugh, then added one last jab at President Biden. “Let’s go Brandon.”
]]>Not that long ago, James Bodenstedt was content with 18 restaurants. “That was enough for me. We never looked to grow, but we positioned ourselves ready to grow if the opportunity arose,” he said. Bodenstedt is president of MUY! Companies, one of the largest YUM! Brands and Wendy’s franchisees.
And arise it did. Monday, October 4, marked the closing of the last of the sales of MUY’s restaurants—all 755 of them in 11 states—for an undisclosed amount. Franchisee Shoukat Dhanani and a newly formed company, Ayvaz Pizza, LLC, purchased approximately 360 Pizza Hut locations. Dhanani, currently the largest Burger King franchisee in the system, is entering the Pizza Hut system with this transaction.
Taco Bell franchisee, HAZA Bells and Wendy’s franchisee, HAZA Foods, both owned by Ali Dhanani, recently purchased MUY’s 85 Taco Bells and about half of the 318 Wendy’s. Roland Spongberg, founder and CEO of WKS Restaurant Group; John Hughes of Wendy’s of Bowling Green; Sanjay Mehra, CEO of Spark United Restaurant Holdings, and Santiago Chico, CEO of 916 Foods purchased the remaining locations.
“I think I can say that this was one of the largest franchisee transactions ever,” said Chris Kelleher, managing director with Auspex Capital, the investment banking firm that managed and advised on the deal. It’s complicated
“There were actually 17 separate transactions, including 755 restaurants, about 25 fee properties, the corporate office and the corporate aircraft,” Kelleher said of the sale. It was all-hands on deck for the Auspex team, as the process started in mid-March with the closing of all the deals six months later—no mean feat. “James was at his home in Italy during long stretches of the sales process so there were weeks where I started with strategy calls with James at 2 a.m. and would quit at midnight the following day, after hours-long APA drafting calls with the lawyers,” said Kelleher.
They had originally structured the Wendy’s deal to sell all of them to Ali Dhanani, but it had to be redone when Dhanani reached the franchisor’s cap on the number of units one company can own.
“That process was a challenge,” he said, “because we broke
October 15, 2021
it up into pieces. And we spent a lot of time with the new Wendy’s franchisees, helping them transition smoothly into the system. That’s hours and hours, especially with due diligence from the franchisor and the buyers’ lenders.”
And at the same time, Auspex handled the debt raise for three of the buyers, too. “There was a seven-bank deal and two five-bank deals,” Kelleher said.
“James is a very experienced dealmaker,” he said. “He understands the process and how to navigate with the franchisors, which is a key part of all of this. He gave us a lot of latitude, as well. He provided great leadership, which is key to the trust built up between everyone who worked on the transactions.”
The Auspex team saw that first hand. They have handled 84 transactions for MUY since first meeting Bodenstedt in 2001. “This is bittersweet for us,” said Kelleher of the long relationship he and his colleagues have had with the MUY team. “We just built great professional and personal relationships with them.”
“I’ve spent 20 years working with Auspex,” said
Bodenstedt. “I wouldn’t have grown like I had without them.” Sharing the pie
Coming in at No. 5 on the 2021 Monitor 200 ranking— the top restaurant franchisees in the nation ranked by sales—MUY was less than half that size 10 years ago, when the company was featured on the cover of Franchise Times, the Monitor’s sister publication, in April 2011: They had 250 restaurants.
Auspex had been advising Bodenstedt and his team since the beginning. “We were with him in his first deal in 2003 when he had zero stores,” said Kelleher. “The magic with James is that he has a great gift for spotting the deal and buying right. And he ran them right, too.”
Part of running them “right” was a keen eye for bringing on talented people, and giving them a stake in the business once they proved themselves. “I don’t always know what the right thing to do is,” said Bodenstedt, “but I can see what has been done incorrectly in the past and what has caused problems.”
And for any restaurant business, that problem is chiefly turnover, at all levels.
“I wanted to make sure the team was focused on the long term,” he told the Monitor. “When you have turnover, it creates a ripple effect throughout the organization.” Each
© 2021 Restaurant Finance Monitor
member of his executive management team was given a stake of ownership in the company.
“When you get the right people, allowing them to have ownership helps with consistency,” Bodenstedt said. “Most companies have a bonus program that changes every year. Ours didn’t change in 20 years.” When people know the goals needed to achieve, and can count on that, they are more likely to meet them.
He said their management turnover was 2%, a small number for the restaurant business, “and our area coach turnover was less than that,” he said. “At some higher levels, our turnover was almost zero.”
Seven direct reports have been with him for years, and Bodenstedt also extended ownership to individuals two more layers down from that, leaving him with a 75% stake in the company.
“There were 17 millionaires created through this (sale),” he reported.
The Non-Acquirer Acquirer
And while Bodenstedt never set out to have a lot of restaurants, he said that throughout the years he acquired about 1,000 locations, some of which were sold years ago.
“Most people thought I was this big acquirer,” he said. “but I turned down a lot of opportunities, too.” For a variety of reasons along the way—maybe the wrong price, wrong geographic fit—he said he probably acted on 10% of the deals set before him.
He had it in his mind to sell in about 2024, “but what I believed was going to happen with the new tax law accelerated that,” he said. “Turns out I was right, it just wasn’t as significant as I thought it would be. Nonetheless, it was just enough that any future value we created would be eaten up by taxes.”
Kelleher sat down with him in late February to explore where the company was financially. “James put together a presentation to his management team and said this is where we are, and this is what we could get,” he said. “It was a unanimous vote to sell it.”
What Bodenstedt will do in retirement is still bit of a mystery, as he said he’ll “be doing what retired people do—travel, you know, the normal retired stuff…Probably volunteer.” But we think he won’t be walking into the sunset long—not for the guy who likes to build things, and bring other people with him.
]]>You have been grinding away for years, never taking a vacation, plowing almost every penny you have ever made back into the restaurants and then one day you look up from your computer screen and ask yourself the proverbial question: “Should I consider selling my restaurant business?”
If this question keeps popping into your head, you need to ask yourself why:
• Bank account is full
• Tired
• Major concerns over macro-economic trends i.e. rising labor costs, commodity cost volatile, etc.
• The brand has peaked
• The capital markets are crazy good
• The tax environment is positive
• Looking for a new challenge
• Rather spend your time chasing around a little white ball or the grandkids
• Better returns are available elsewhere
• Spouse says it’s time
• Doctor says it’s time
Once you figure out the WHY, you can start thinking about HOW to sell your restaurant business and WHEN.
Most restaurant industry entrepreneurs don’t work like dogs for years on end and take unconscionable financial risk just for the fun of it. Making a lot of money is almost always of paramount importance, and therefore, financial considerations will be the critical factor driving the timing of the exit.
From a financial perspective, the ideal time to sell is when all of the following conditions are present:
• Macro-economic trends are positive
• The overall restaurant sector is in favor
• Your segment of the restaurant industry is in favor
• Your brand has strong momentum
• Your business is firing on all cylinders
• The lending markets are robust
• Private equity is plentiful
While it is unlikely that all of these critical economic factors will be bright green at the same time, if they are, it’s probably time to get out of town, and pronto. Conversely, if they are all red or mostly red and yellow, you can probably go ahead and renew your subscription to Franchise Times. It’s important to understand that it only takes one of these factors working against you to have a significant impact on value. By way of example, consider the current plight of Domino’s franchisees. The world is pretty darn good for them these days, but with the likes of Uber Eats and Door Dash having recently crashed the delivery party, there are suddenly serious questions about the viability of the pizza sector’s business model.
For some restaurant business owners this actually can be an important a factor in the decision process as the financial considerations. Managing a vibrant entrepreneur enterprise can be a pretty exhilarating experience and for most successful franchisees, managing your stock portfolio, not so much!
Making the right decision is a tough task and may be quite overwhelming and exhausting for some of us. Thus, it’s a great idea to relax and give yourself a breather in a time of uncertainty. What is the best way to relax these days? With download free casino slot games play offline you will find out how to relax correctly. Myriads of free slots with bonuses and riveting gameplay can be lucrative yet fascinating. Thus, why not try them out?
You may not always think so, but you have developed close personal relationships with employees, fellow franchisees, vendors, maybe even your bankers and lawyers
(well, probably not the lawyers). Most of those relationships will go by the wayside when you sell. You need to be ready for that. It’s also important to remember that you have a lot more control over your restaurant company than you do the New York Stock Exchange. Another thing you need to think deeply about: What is your next act? Five rounds of golf a week or another deal?
If you are uncertain if you are ready to completely walk away, there are realistic alternatives to getting all the way out:
• Sell a minority stake
• Sell a majority stake
• Keep some of the stores
• Keep the real estate
• Stay on as a part time consultant
• Don’t like the brand’s current CEO. There will be a new one soon.
• Don’t like the brand’s current CMO. There will be a new one soon.
• Don’t like the new store prototype. There will be a new one soon.
• Don’t like the new ad agency. There will be a new one soon.
• My rival brand is kicking my butt — they have the Midas touch. Right now that may be true, but it’s only a matter of time before their golden boy CMO launches a couple of bone-headed promotions or a series of really awful ad campaigns.
• My longtime director of operations just told me he is moving to Tibet to become a Buddhist monk —tomorrow! That’s a real bummer, but that’s what high-priced headhunters are for.
• My best restaurant burned to the ground last night. Also a bummer, but nobody got hurt, you’re fully insured, and it needed a remodel anyway.
Are any of the kids ready, willing and able? You need to be extremely honest with yourself on this because the answer must be a definitive “yes” to all three or it won’t have a happy ending for them or for you.
Make sure you think through the decision very carefully as it is extremely difficult to un-ring the bell. If you change your mind after the sale process has been initiated, your franchisor, management team, employees and lender will all know you have at least one foot out the door which is likely to adversely impact their commitment
to you.
THERE IS NO EASY ANSWER. TIMING, FINANCIAL AND EMOTIONAL FACTORS ALL NEED TO BE THOUGHTFULLY CONSIDERED BEFORE YOU SELL YOUR RESTAURANT BUSINESS.
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