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Despite a slower dealmaking market this year so far, several major acquisitions closed in the first half of 2024. Private equity firm Roark Capital bought Subway after a reported FTC investigation, Orangetheory Fitness and Self Esteem Brands merged, and Blackstone bought 1,400-unit Tropical Smoothie. Franchise Times rounded up seven of this year’s biggest deals so far.
Roark buys Subway after FTC approval
Eight months after the deal was announced, the long-anticipated sale of Subway to Roark Capital was finalized in April after federal regulators signed off on the acquisition, according to the sandwich chain.
Roark’s acquisition of Subway for a reported $9.6 billion was held up by the U.S. Federal Trade Commission, which had concerns the sale would give the Atlanta-based private equity giant an unfair advantage in the sandwich restaurant business. Inspire Brands, another Roark-backed restaurant holding company, acquired fellow sandwich chain Jimmy John’s in 2019.
By completing one of the largest acquisition deals in franchise history, the private equity firm now owns two of the biggest sub sandwich companies in the United States. With the purchase of Subway, one of the world’s largest quick-service restaurant brands, Roark adds Subway’s nearly 37,000 stores in more than 100 countries and territories.
Subway’s FDD reported revenue increased 10.3 percent to $971.9 million in 2023, with approximately 40 percent of that growth coming from the company’s vendor funds that sell food ingredients and equipment to franchisees. —J.H.
Blackstone picks up Tropical Smoothie
After less than four years in its portfolio, Levine Leichtman Capital Partners sold Tropical Smoothie Cafe to Blackstone. In June, the two private equity firms announced completion a deal that puts the 1,400-unit cafe and smoothie franchise in Blackstone’s sprawling investment portfolio. While terms of the deal weren’t disclosed, The Wall Street Journal reported Blackstone agreed to pay nearly $2 billion for the chain.
Tropical Smoothie, which serves smoothies, bowls, sandwiches, salads and other items, did $1.25 billion in systemwide sales last year from 1,373 stores. That’s nearly three times the sales it generated in 2018, according to Franchise Times Top 400 data. It’s seen 40 percent unit growth since 2020, when Los Angeles-based Levine Leichtman acquired the brand from BIP Capital.
Blackstone’s previous franchisor acquisitions include Hilton Hotels and disaster restoration company Servpro. For Levine Leichtman, the sale is one of several notable franchise exits for the company in recent years. It sold Nothing Bundt Cakes to Roark Capital in 2021, and the following year sold Hand & Stone Massage and Facial Spa to Harvest Partners. —L.M.
Sony acquires Alamo in Hollywood first
Sony Pictures Entertainment bought movie theater franchise Alamo Drafthouse Cinema for an undisclosed amount, the companies announced June 12.
Alamo CEO Michael Kustermann will stay in his role and head up Sony Pictures Experiences, the newly launched division of Sony Pictures Entertainment. Alamo’s existing franchisees continue to own and operate their theaters. Sony bought Alamo from founder Tim League and private equity companies Altamont Capital Partners and Fortress Investment Group.
An acquisition like this wasn’t possible a few years ago, as the U.S. Department of Justice barred Hollywood studios from owning movie theaters. The DOJ struck down the rule in August 2020. Sony is the first Hollywood studio to buy theaters following this change, although Netflix owns a few theaters.
This deal follows the news of an Alamo franchisee closing six locations in June after filing for Chapter 7 bankruptcy protection. Two is One, One is None LLC operated one cinema in Minnesota and five in Texas. It’s not clear if Sony plans to reopen the closed theaters. —E.W.
RBI purchases largest Burger King ‘zee
Restaurant Brands International acquired Burger King’s largest franchisee, Carrols Restaurant Group, in May. RBI announced its plan to buy the public company in January. It already owned 15 percent of Carrols’ stock. At $9.55 per share, the deal is worth about $1 billion. Burger King will invest $500 million to modernize more than 600 of Carrols’ restaurants over the next seven years.
Carrols owned 1,022 Burger King restaurants in 23 states, plus another 60 Popeyes in six states. In the year ending September 30, systemwide sales topped $1.8 billion. The nearly 20,000-unit franchisor plans to refranchise nearly all of Carrols’ portfolio to smaller franchisees in the next five to seven years.
Before this acquisition, Burger King was operating just 175 corporate stores. —E.W.
Brix Holdings adds Clean Juice, despite disgruntled franchisees
Organic juice franchise Clean Juice closed numerous stores last year and was on the receiving end of a few arbitration filings from franchisees who claim the business model doesn’t work. Now, Brix Holdings is determined to give the franchise a brighter future.
“Clean Juice has gone through a bit of troubled waters lately with a group of franchisees that, for a variety of reasons, struggled in making their units work,” Brix CEO Sherif Mityas said. “At this point, most of those troubles are behind the brand.”
Brix acquired 75-unit Clean Juice in April. Brix owns Friendly’s, Red Mango and Orange Leaf, among others. The deal brings Brix Holdings’ eight-brand portfolio to more than 300 units.
At the center of franchisee complaints last year was Clean Juice’s shift to bottled juices rather than juice fresh pressed in stores. Some franchisees claimed their stores weren’t profitable even before the change. Under Brix, operators will continue selling the prepressed juice bottles.
“The model works, but you have to have committed, engaged franchisees that understand the brand, understand what it takes to locally market the brand, understand what it takes to serve guests and create a great experience,” Mityas said. “When you do that, the Clean Juice model is a very profitable model.” —E.W.
Big Sonic franchisee acquires 20 Zaxby’s
After selling its Little Caesars and Meineke businesses in separate transactions, Guernsey Holdings went back on the buy side with its April acquisition of 20 Zaxby’s in South Carolina from longtime franchisees Jim and Britt Poston.
Mike James, founder and CEO of Guernsey, said for several years he’d been looking for the right chicken concept to complement his portfolio of 100 Sonic restaurants and three Take 5 Oil locations.
Guernsey evaluated a handful of deals and found the right fit with Performance Management Group, which the Postons built up over 27 years in the system. Guernsey partnered with the existing management team of Candice Anderson and Chad Ham, who James said have a “meaningful ownership stake in the business.”
“We were looking for a platform investment and it had the team, which frankly is more important,” said James. —L.M.
Self Esteem Brands, Orangetheory merge
In a joint announcement April 2, Orangetheory Fitness and Self Esteem Brands said the merger of the two companies creates “the world’s largest portfolio of powerhouse brands.” The brands later announced a new name for the platform company, Purpose Brands. It has about $3.5 billion in systemwide sales and approximately 7,000 franchise locations across 50 countries.
Roark Capital is an investor in both companies. It invested in Self Esteem Brands, the parent of Anytime Fitness, in 2014, and in 2016 made a growth equity investment in Orangetheory.
Shortly after the merger, a newly formed franchisee association, Team Orange Independent Franchise Council, addressed Purpose Brands via letter about “clear and compelling” challenges in membership growth. The council also noted profitability concerns in the system of more than 1,300 U.S locations.
“Instead of addressing these issues, the responses we have received from OTF when we point this out have been deflective, defensive and lacked any urgency to solve short term and long-term pain points in a variety of areas,” according to a copy of the letter reviewed by Franchise Times.
Four-wall EBITDA, or cash flow, averaged about $300,000 systemwide in 2019, the council wrote, citing collective records after a poll of large multi-unit professional operators representing 376 owned studios. The figured has fallen by more than 50 percent in 2023, the letter stated.
In an “Owners Only Q2 Update” sent to franchisees May 31 and reviewed by Franchise Times, Orangetheory noted it is “tracking well below” the goal of plus-50 net members per studio. The company announced in the update a “reset” goal of plus-10 percent net recurring growth versus the plus-50 member goal. It highlighted new initiatives, including a series of experiments to “test the impact of changes to the media mix, content strategy and executional details” in local, regional and national marketing. —L.M.
Correction: An earlier version of this story incorrectly stated 40 percent of Subway’s total revenue in 2023 came from the company’s vendors that sell food and equipment to franchisees.
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