U.S. Markets open in 5 hrs 48 mins

Roark's Inspire Brands to acquire Jimmy John's amid a fast-food boom for PE

Eliza Haverstock

In bold red and black type, the  Jimmy John's website proudly proclaims: "We're freaky fast so your sandwich arrives freaky fresh."

That zesty tagline, or perhaps a robust fast-food industry, has proved irresistible to ravenous private equity buyers.  

On Wednesday, private equity-backed Inspire Brands announced an agreement to acquire the sandwich slinger for an undisclosed sum. The acquisition will make Inspire Brands—which also owns Arby's, Sonic Drive-In, Rusty Taco and Buffalo Wild Wings—the fourth-largest restaurant company in the US, per a press release announcing the deal, taking its annual system sales to $14 billion and expanding its total footprint from about 8,300 restaurants to 11,200.  

While Jimmy John's is officially changing hands, it will remain under the ultimate control of  Roark Capital Group, which is both the current owner of Jimmy John's and the creator of Inspire Brands. In 2016, Roark acquired a majority stake in Jimmy John's in a deal worth $2.3 billion, with Boston-based private equity firm  Weston Presidio exiting a minority stake it had held for nearly a decade. Two years later, in 2018, Roark formed Inspire Brands following the $2.9 billion acquisition of Buffalo Wild Wings by Arby's, one of the firm's existing portfolio companies. . 

In a way, Roark just agreed to buy what it already owns. 

Jimmy John's traces its origins back to a converted garage near the Eastern Illinois University campus. It was there, in 1983, where founder Jimmy John Liautaud began his now-ubiquitous sandwich business, which has since expand its quick-delivery model to over 2,800 franchises. 

That franchise structure is surely part of the company's appeal to Roark, which predominantly invests in consumer-facing companies in the restaurant and retail spheres. Roark has a special appetite for franchise models; firm founder Neal Aronson co-founded US Franchise Systems, a hotel brands operator, before opting for a private equity career.

Last year, Roark added Sonic to the Inspire Brands portfolio in a $2.3 billion deal, and a month later, the Atlanta-based firm raised a total of $6.5 billion for a new flagship fund and a related sidecar vehicle. Roark's restaurant holdings also extend far beyond Inspire Brands. The firm paid $200 million for Jamba Juice in 2018, and it has held stakes in Auntie Anne's, Carvel and Wingstop

The firm's new move on Jimmy John's reflects a broader trend: private equity is hungry for fast food. Through the first nine months of this year, private equity deal value in the fast food sector is approaching $5.35 billion, per PitchBook data. For all of 2012, that figure was just $3.17 billion. One of the largest deals this year was the $740 million take-private buyout of Bojangles', a beloved Southern fried chicken purveyor that was acquired by Durational Capital Management and The Jordan Company

Roark's efforts to build out the Inspire Brands portfolio aren't the only recent instances of fast-food consolidation supported by private equity. 3G Capital and its Restaurant Brands International present another example of a firm creating a conglomerate of chains. Formed in 2014, RBI now rakes in more than $32 billion in annual sales from its subsidiaries: Burger King, Popeyes and Tim Hortons

Featured Image via Kristina D.C. Hoeppner/CC by 2.0
 

Related read: Roark Capital, where Ayn Rand meets Arby's