Flynn doubles with Major Pizza Hut, buying Wendy | Negotiators

Greg Flynn, Flynn Restaurant Group, has purchased over 1,000 restaurants from NPC.

Who should get credit for Flynn Restaurant Group’s purchase of 1,131 stores from bankrupt NPC International? “The whole Flynn team, even though I got this one over the finish line myself,” Founder, President and CEO Greg Flynn said after the deal was closed. last March.

The company added 937 Pizza Hut restaurants and 194 Wendy’s restaurants. He now owns and operates more than 2,300 restaurants generating more than $3.5 billion in annual sales — and Flynn gestured upward when asked in March for his updated sales forecast. “We significantly outperform in both systems,” he said, declining to cite numbers. “Quite significantly.”

Flynn’s subsidiaries include the largest franchisee of Applebee, the largest franchisee of Arby, the second largest franchisee of Panera Bread and the third largest franchisee of Taco Bell. The newcomers are the largest Pizza Hut franchisee and the fifth largest Wendy’s franchisee.

Flynn Restaurant Group is No. 1 on the Franchise Times Restaurant 200, the ranking of the largest franchised restaurants in the United States. NPC, formerly No. 2, no longer exists after racking up more than $900 million in debt and filing for Chapter 11 in July 2020. Flynn is also the No. 3 restaurant operator in the United States, behind Starbucks and Chipotle, “and I I plan to get closer to Chipotle,” Flynn said.

Rescuing NPC’s assets and people was “very” important to him. “From the start, we believed it was in the interest of all stakeholders to keep the companies together as much as possible. The court agreed,” Flynn said.


Greg Flynn at the Golden Gate Bridge near the company’s headquarters in San Francisco.

“People are the most valuable part of both businesses,” the operations of Wendy’s and Pizza Hut. “What we’ve found is that there are some really, really good people out there,” Flynn said, both in terms of decades of experience and operational performance.

“We’ve seen it time and time again, if you give people the ability to perform with a little more freedom and autonomy, and paint a picture of a better outcome, and equip them with the resources they need to accomplish them, and you align your interests with profit sharing,” he said.

“We believe we are now seeing better performance from the same people, better performance than anyone expected, asked or equipped them to deliver.”

Bank of America is Flynn’s investment banker.

Cypress Group represented NPC in the sale. “It was quite an event, especially given the circumstances and then COVID and all the dynamic going on with the brands. It was a pretty fascinating deal,” said Dean Zuccarello, managing partner of the investment banking firm. “We got the gig largely thanks to Monarch,” NPC’s biggest debt buyer.

“NPC was already experiencing a certain level of financial difficulty given its capital structure. They had made a bunch of acquisitions and were already overleveraged,” he said. Greenhill & Co. and AlixPartners were hired to restructure, but NPC’s debt “was bought in the market at a deep discount,” led by Monarch Alternative Capital. “Monarch has become the 600-pound gorilla.”

Zuccarello described a tense scene. “Attempts at restructuring stalled. Lenders were pressuring the company to consider other options. And that’s when Monarch, as head of the creditors’ committee, told NPC he wanted Cypress hired,” he said.

“It was definitely in our sweet spot. We had done all of the Wendy’s refranchises, and we had experience in the past doing business with Pizza Hut,” Zuccarello said. “The size itself was not alarming; it’s just that every time you face a situation like this, you have so many cooks in the kitchen. The hard part was overcoming that.

The original plan was to sell NPC’s 400 Wendy’s restaurants to Flynn, but Wendy’s company balked. This sent Cypress on the hunt for other buyers, eventually identifying five existing franchisees. Delight Restaurant Group was one of them.

Operated by brothers Andrew and Rich Krumholz, Delight purchased 54 Wendy’s in North Carolina from NPC for $60 million, and another 44 company-owned Wendy’s in New York for the same amount. They grew from 60 restaurants to more than 155, helping to provide an “elegant solution” for NPC, according to their nomination.

What did they learn from the offers? “Reputation matters,” the brothers said on the form, adding that they “want to be the go-to franchisee that franchisors trust.” Andrew Krumholz said in an interview that the effort “humbles us every day” as well. “The brand wants franchisees who are going to run great restaurants and invest in restaurant assets, and we’re trying to do a really good job and keep our heads down.”

In the portfolio purchased from NPC, same-store sales were up 9% for the year, “which is a huge change from the trend they were on,” he said.

Flynn said one of the attractions of the deal “was how difficult it was going to be, because it’s a barrier to entry. I don’t think there were many other potential buyers who could go through the process. I have a high pain tolerance.

“In the event of bankruptcy, you really need to have cash. We placed an $80 million non-refundable deposit early in the process. Then you need to have the sophistication and the advisors to get through bankruptcy.

What kind of pain? “You just can’t believe how many lawyers are involved and how much money – I won’t say it’s a waste, but you’re sitting there on calls and there are 30 lawyers on the job. call. My god, he said. “Then the hard part is you have to be approved by the franchisors,” he said. “It made it an exciting and challenging business.”

Yum Brands owns Taco Bell and Pizza Hut, so it was relatively easy to get their approval due to the success of Flynn’s Taco Bell operation. On the other hand, “we had never done business with Wendy’s before. We tried to educate them as best we could about our background, but like many things in life, they will judge us over time on what we do, not what we say,” Flynn said.

“They brought a healthy level of skepticism to the conversation, partly because of the context. The last guys, NPC, also made a lot of promises. We both tried to find a solution that makes everyone happy.

This year, the focus is on operations and construction. “What we always focus on is running our restaurants well. It’s the absolute key to the business,” Flynn said. “We have also made serious commitments regarding the assets we have acquired, and we will ensure that these commitments are met.” The company spends “tens of millions” of dollars on renovations, moves and construction.

Flynn isn’t done yet. “We’re open for business, so listen, if you’re out there and want to sell, we’re out there. Let us know.”

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