What is in this article?:
- Flynn Restaurant Group receives $300M investment
- Resources to grow
The deal gives Ontario Teachers’ Pension Plan a more than 50-percent stake in the franchise operator and brings the company's value to more than $1 billion.
Flynn Restaurant Group L.P., the nation’s largest franchisee and an operator of the Applebee’s and Taco Bell brands, closed Tuesday on a $300 million strategic investment from a Canadian teachers’ pension fund, a deal that brings the company’s value to more than $1 billion.
With the investment, the Ontario Teachers’ Pension Plan, or OTPP, holds a more than 50-percent stake in the franchise operator. Joining the pension fund in the deal is Flynn Restaurant Group founder, chairman and chief executive Greg Flynn, along with other members of the franchise group’s management team, who, as a result, significantly increased their direct ownership in the San Francisco-based company.
The management team, along with OTPP, through its Teachers’ Private Capital group, has purchased the interests held by private equity firms Goldman Sachs Group Inc. and Weston Presidio, allowing those two groups to exit their investment.
Flynn Restaurant Group, or FRG, is now the first domestic franchisee to be valued at more than $1 billion, Flynn said. The franchise group is also the first to successfully exit from conventional private equity ownership.
“We have a better growth story than many franchisors,” Flynn said.
Unlike private equity, the OTPP investment provides “evergreen capital” without the performance pressures related to fund timing that often come with conventional private equity partnerships, Flynn said.
“Many franchise owners are uncomfortable with private equity because of those timing issues,” he said.
Pension funds typically invest in private equity managed funds, but in this case, OTPP is “cutting out the middle man” by making a direct investment, said Flynn.
At the end of 2013, OTPP had net assets of $140.8 billion. According to the Wall Street Journal, it was the pension fund’s first investment in the restaurant space.
Jane Rowe, senior vice president of Teachers’ Private Capital, which manages a global portfolio valued at about $14.8 billion, said the fund has been impressed by FRG’s growth and its opportunities for expansion.
“Greg and his team have done an outstanding job of delivering strong financial results by fostering a culture of continuous improvement and by delivering a consistently enjoyable and affordable dining experience to its guests,” she said, in a statement. “We are excited to have the opportunity to support Greg and his team as they continue to execute their strategic plan and enter the next stage of their growth.”