By Ryan D. Lavender
Published on March 9, 2021 at 4:55 PM
On January 6, 2020, Yum Brands announced its plan to acquire The Habit Burger Grill, which as of full-year 2019 was the 17th-largest burger concept in the U.S. (in terms of domestic systemwide sales, at $450+ million), and in the top 100 overall. The Habit Burger Grill is meaningfully smaller than Yum’s core brands of KFC, Taco Bell, and Pizza Hut. As such, the acquisition of Habit (which closed on March 18, 2020) suggests that: (1) Yum Brands may be generally acquisitive in the future (incidentally, in keeping with current general industry trends), and (2) it isn’t hesitant to make an acquisition that it believes will create shareholder value in the long term, even if the size of that acquisition isn’t all that large relative to its core brands today.
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By Mark Kalinowski
Published on November 5, 2019 at 12:00 AM
Since reporting its third-quarter results and hosting its related conference call late last month, Denny’s (DENN; Buy) stock has mostly drifted downward. We believe that one factor contributing to this slide has been concern on the Street that Denny’s might acquire part or all of another restaurant concept. In our view, it would be a mistake for Denny’s to do so. We believe the odds do not favor Denny’s pursuing this route, although we (of course) cannot rule out this possibility with 100% certainty. We reiterate our Buy rating on DENN, and note the following:
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By Mark Kalinowski
Published on February 12, 2019 at 12:00 AM
At the recent ICR Conference 2019, management of Darden Restaurants (DRI; Not Rated) — owner and operator of Olive Garden, LongHorn Steakhouse, and several other full-service restaurant concepts — stated that on the acquisition front, “$300 million in system sales is the lowest we’d look at,” while “$750 million to $1 billion would be better” as “we’d want any acquisition to matter.” Management also made clear that it would intend to be disciplined in terms of what it would pay for any potential acquisition: “a lot of things would have to line up… the right vehicle being available at the right price… we’re not going to chase something.” Given this context, what are some restaurant-concept possibilities that Darden might look at acquiring, if they were to become available to Darden at the right price? This report briefly examines some specific possibilities, including First Watch, Cooper’s Hawk Winery & Restaurants, and Black Bear Diner. Not coincidentally, these three privately-held concepts ranked #1, #2, and #3 in terms of their U.S. system sales growth rate during 2017 amongst all full-service restaurant concepts of size $200 million or larger. We note the following:
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