Why Isn't Roark Investing in Restaurants?
Roark Capital Group Managing Director Steve Romaniello offers a glimpse into the firm's restaurant-investment strategy in the year ahead.
By David Farkas, Senior Editor -- Chain Leader, 11/20/2009 8:21:00 AM
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| Roark Capital Group Managing Director Steve Romaniello: "We typically try to make our returns on operations and growth." |
Roark Capital Group hasn't been shy about spreading the wealth among growth-oriented restaurant companies. Until this year. The Atlanta-based private equity firm, which controls several fast-growing chains, hasn't done a restaurant deal in 2009. We asked Managing Director Steve Romaniello to explain why and to tell us when he expects Roark to return to investing in the restaurant space.
Roark has done several transactions recently, yet none in the restaurant space. Why not?
We continue to be active in our pursuit in this space. But we have not seen the deal flow shake out quite yet. We hope to be much more active and substantially increase our restaurant holdings in 2010.
Are you still looking at franchise models?
We like franchising. That's an expertise of the firm, in general. But we love restaurants and have gone pretty far down the road with large multiunit franchises. So we like both sides of the equation: franchisor and franchisee.
Is that why Roark added two people from [private-equity firm] Bruckman, Rosser, Sherrill & Co. , who have restaurant-investment experience?
In addition to those two, I came on board [from Focus Brands, where he was CEO] earlier this year, and we are adding Geoff Hill, who's currently president of Cinnabon.
| Roark's Restaurant Investments |
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Concept, year acquired Carvel, 2001 Cinnabon, 2004 Seattle's Best Coffee (international locations only), 2004 McAlister's Deli, 2005 Schlotzsky's, 2006 Moe's Southwest Grill, 2007 |
So, in fact, Roark does "love restaurants," as you put it?
We like to invest in areas we know well. We have well over 100 years of operating experience among the CEOs, CFOs and heads of development who are part of the Roark team. As we get more excited about the restaurant space, we have added the two individuals [Vice Presidents James Collins and Jamie Wall] you referred to.
Let's talk about pitches. Is Roark being pitched or does Roark do the pitching these days?
It's a combination of both. There are times when we get approached by folks who think we can help them with whatever they are looking to achieve, whether that's to provide growth capital or an exit strategy. We are also active in those processes led by banks.
If someone wants to pitch you, what advice do you offer?
Every situation is different.
Let's say it's a successful franchisor that wants to build a distribution center.
We would not just finance a distribution center. However, we've made investments in companies in order to provide them with a capital structure so they can execute a operations plan, which would include, among other things, fixing distribution.
So what kinds of requests are you hearing?
Companies are now coming to us and saying, "The recession stinks. We are hanging in there OK. We think this represents a once-in-a-lifetime opportunity to capitalize on things that arise in an environment like this."
Such as?
It could be someone who owns 100 restaurants and believes there's an opportunity to go from 100 to150 restaurants in a couple of years through smart acquisitions. It could be an expansion strategy. Because their competitors are not expanding, they think there's the opportunity to be first in market. Or it could be an opportunity to bolster a management team. There are a lot of great people who, through no fault of their own, are out there and available. We get all of those requests, and often it's a combination of them.
Which are you most likely to take to the partners and say, "This deal sounds really good?"
We are generally growth investors. Where we can come in and through our experience and/or capital we can help facilitate more rapid growth, that's where we are most comfortable.
In other words, each situation is different.
We talk all the time about how we try to learn from each experience and apply the lessons. But rarely do we see [deals] that directly line up. It's always a different nuance, personality, segment or menu. Yet what we are looking for are concepts that are on-trend and with the wind at their back.
