SYRACUSE — The largest Burger King franchisee in the U.S. is adding another restaurant brand to its portfolio.
Syracuse–based Carrols Restaurant Group (NASDAQ: TAST) recently announced a deal that will include acquiring 166 Burger King and 55 Popeyes restaurants in 10 Southeastern and Southern states.
The restaurants are part of a merger agreement with Memphis, Tennessee–based Cambridge Franchise Holdings, LLC, Carrols said in a Feb. 20 news release.
Speaking on an investor conference call that same day, Dan Accordino, chairman and CEO of Carrols Restaurant Group, called it a “transformational transaction” for the company.
“The addition of Popeyes provides us with a complementary platform to our core Burger King business, allowing us to expand in the Popeyes system and to leverage the strong brand as another avenue for growth. Cambridge has already built a solid Popeyes business with 55 restaurants throughout Kentucky, Louisiana, Mississippi, and Tennessee and has ongoing growth opportunities through its existing development pipeline and the opportunity to acquire additional restaurants,” Accordino said.
In the Carrols news release, Accordino noted that the addition of Popeyes to its restaurant portfolio also offers “diversification to our commodities exposure and geographic footprint.”
Cambridge has an “established track record” of developing both new Burger King and new Popeyes restaurants that Carrols believes will benefit its stockholders and “broaden its capital allocation and growth opportunities,” according to Carrols.
“It further strengthens our position in the Burger King system and provides us the opportunity to continue executing our Burger King acquisition and expansion strategy,” Accordino added on the conference call.
Carrols had 849 restaurants as of Dec. 30, 2018 and has operated Burger King restaurants since 1976.
Cambridge Franchise Holdings was founded in 2014 when Matt Perelman and Alex Sloane partnered with Ray Meeks to grow his 23-unit Burger King business. Since 2014, Meeks, Perelman, and Sloane have grown Cambridge to include 166 Burger King restaurants and 55 Popeyes eateries throughout the Southeast.
Perelman and Sloane are co-managing partners of Garnett Station Partners (GSP), an investment firm focused on retail and consumer companies. Garnett Station Partners has offices in Bartlett, Tennessee and New York City, per its website.
“We expect to complete the merger in mid-to-late April timeframe, at which time, both Matt and Alex will join our board,” Accordino said.
The transaction will be structured as a tax-free merger. Cambridge, which is controlled by Garnett Station Partners and owned by some large family office investors, will receive about 7.36 million shares of Carrols common stock, and at closing will own about 16.6 percent of Carrols’ outstanding common shares. The transaction doesn’t include a cash component.
As part of the deal, Cambridge will have the right to designate up to two director nominees and Perelman and Sloane will join the Carrols board of directors upon completion of the merger.
Carrols believes that Cambridge will provide it with a “platform and relationships to grow” within the Popeyes brand. Cambridge has already built a Popeyes business with 55 restaurants in Kentucky, Louisiana, Mississippi, and Tennessee and has additional “growth opportunities” through both acquisitions and new restaurant development. As part of the transaction, Carrols will assume Cambridge’s existing development agreement with Popeyes, which provides for an acquisition right-of-first-refusal (ROFR) in Tennessee and Kentucky and the development of about 70 new Popeyes restaurants over the next six years.
“We will be assuming Cambridge’s existing development agreement with Popeyes, which provides for an acquisition ROFR in Tennessee and Kentucky in the development of approximately 70 new Popeyes restaurants over the next six years,” said Accordino.