Wendy's Agrees to Sell Arby's to Private Equity Group

AFP
June 13, 2011

Wendy's/Arby's Group Inc. says it has agreed to sell a majority stake in its struggling Arby's brand to a private equity group.

The Atlanta company had put Arby's up for sale at the beginning of the year, saying it needed to focus on the better-performing Wendy's restaurants.

The buyer is a group led by Roark Capital Group, an Atlanta private equity firm that also owns Moe's Southwest Grill and Cinnabon.

The buyers are paying $130 million in cash for Arby's. In addition, the group will assume $190 million of Arby's debt, Wendy's/Arby's Group will keep an 18.5 percent stake in Arby's.

The companies value the overall deal at $430 million. That includes the debt being assumed, the value of the minority stake that Wendy's keeps and an $80 million income tax benefit for Wendy's.

The deal is expected to close in the third quarter.

Burger King, Franchisees Drop $1 Burger Lawsuit

Reuters
April 18, 2011

Burger King Corp's U.S. franchisees agreed to dismiss a lawsuit over $1 cheeseburgers, and will gain more power to set prices for the fast food restaurant chain's cheaper items.

The agreement, announced on Monday, comes as the Miami-based Burger King's new private-equity owners try to repair its historically contentious relationship with franchisees, who operate almost all of the restaurants for the world's second-biggest hamburger chain.

The National Franchisee Association (NFA), which represents Burger King franchisees, sued the company in 2009. Its main complaint was the company's decision to set the Value Menu price of its Double Cheeseburger at $1, a move operators said hurt profits.

Burger King's new policy gives franchisees more input on the price of items on its Value Menu and on how long special deals run, said Steve Wiborg, Burger King's president of North America. He declined to give more specifics.

"We saw this as an opportunity to resolve our differences and move forward," Wiborg told Reuters. "Our system is 90 percent franchised and it's important for our franchisees to win."

Wiborg was president and chief executive at Heartland Food Corp, one of Burger King's largest franchise operators, before taking his position at the company in October.

Burger King's new management has engaged franchisees in meaningful discussions and is listening to their concerns, said NFA Chairman Tony Versaci.

3G Capital bought Burger King in October for $3.26 billion and took it private.

At the end of 2010, there were 7,550 Burger King restaurants in the United States and Canada.

Fast-food chains like Burger King and bigger rival McDonald's Corp use low-priced food like $1 burgers to lure diners into restaurants. If those items are priced below costs, franchisees can suffer.

That is because franchisees pay royalties to the parent company based on overall sales. While $1 menu items can boost traffic and sales, restaurant operators can lose money if too many of those sales come from money-losing items.

Costs for ingredients such as beef, cheese, wheat and corn have spiked in recent months.