Boyden Executive Search

Private equity-owned Inspire Brands adds Dunkin’ to its expanding portfolio of potentially pandemic-proof fast food restaurant chains in a landmark deal.

Dunkin’ Brands, the parent company of Dunkin’ and Baskin-Robbins, has agreed to sell itself for $11.3 billion, including debt, to Inspire, a holding company backed primarily by private equity firm Roark Capital. The acquisition is one of the biggest restaurant deals in over a decade – by some accounts the restaurant industry’s second-largest and most expensive transaction. Inspire already owns an array of well-known fast food chains and is one of the largest restaurant operators in America. Dunkin’ will more than double its footprint, adding 12,700 Dunkin’ and 7,900 Baskin-Robbins stores, all of which are franchised.

Atlanta-based PE firm Roark Capital has focused on franchises since its founding in 2001 by current Managing Partner, Neal K. Aronson. The firm took its first step toward amassing a portfolio of fast food chains when it acquired a struggling Arby’s in 2011, and subsequently turned the business around. Roark shifted into high gear in 2018, acquiring Buffalo Wild Wings, combining it with Arby’s, and forming Inspire Brands. Later that same year Inspire acquired Sonic, then added Jimmy John’s to the portfolio in 2019.

Dunkin’ represents Inspire’s first dip into the coffee and breakfast space. It also differs in that, as analyst Michael Halen of Bloomberg Intelligence points out, “Dunkin’ has not been struggling. They managed the pandemic really well.” Since March, the company’s share price has more than doubled. Fast food restaurants in general have fared better than full-service restaurants. Because they have been geared largely to takeout and drive-through all along, they did not have to rearrange their operations overnight to survive. Dunkin’ easily shifted to contactless takeout and delivery. About 70% of its restaurants already had drive-through windows.

Dunkin’ was also ahead of many in the restaurant industry in terms of technology, as it was already investing in digital ordering tools to promote “high-frequency, low-touch” service, according to The New York Times. In 2018, it launched a $100 million plan to implement a “beverage-led strategy,” as the company described it. This has enabled Dunkin’ to benefit from the disruption of many people’s daily routines: Rather than going through the drive-through on their way to work, customers are making a run to Dunkin’ for a premium coffee beverage in the afternoon.

By putting an already successful restaurant chain in the hands of a private equity firm with a track record of bolstering its portfolio companies, the acquisition could have an impact on the competitive landscape. Dunkin’ will compete more directly with Starbucks as well as European PE firm JAB Capital, which owns Panera, Peet’s, Krispy Kreme and others. As Dunkin’ pursues its long-term goal of growing to more than 17,000 locations, “The ability to expand on the West Coast is essential,” said Peter Saleh, an analyst at brokerage firm BTIG. As Saleh has previously warned, Dunkin’ is approaching saturation in its home region, the Northeast.

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