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The deal offers FRG resources to grow both its Applebee’s and Taco Bell brands, as well as through potential new acquisitions, Flynn said.

FRG operates 470 Applebee’s restaurants through subsidiary Apple American Group LLC, the largest franchise group for the casual-dining brand.

In addition, FRG owns 170 Taco Bell restaurants through subsidiary Bell American Group LLC, the third-largest franchisee of that quick-service brand.

Together, the two divisions generate about $1.4 billion in annual sales. Flynn said FRG has experienced a compound annual growth rate of 36 percent since its founding in 1999.

The group expects to open 17 new Applebee’s restaurants in 2014, along with five new Taco Bell units.

Applebee’s is franchised by Glendale, Calif.-based DineEquity Inc., and Taco Bell is a division of franchisor Yum! Brands Inc., based in Louisville, Ky.

Flynn has long said the company is looking for a third fast-casual brand to add to its portfolio, though he declined to say what the concept might be.

He noted, however, that franchised brands like Applebee’s, Taco Bell and Panera Bread have well-developed multi-unit franchise operators who may be looking to sell their companies as they retire or exit the industry. Those sellers are looking for a sophisticated, well-capitalized buyer like FRG, he said.

Still, Flynn said, “I’m not saying Panera is or isn’t,” the next brand to be added to the FRG portfolio. “But fast casual is the natural place to plant the next flag.”

Another first for Flynn

For FRG, the deal is yet another first in its ongoing attempt to break the mold for franchise companies, which have long been viewed in the investment community as “second-class citizens and traded at a discount,” Flynn told Nation’s Restaurant News.

FRG was the one of the first U.S. franchise operators to attract significant private-equity funding when Goldman Sachs first invested in it in 2001, he noted. The group later became the first franchise company in the U.S. to surpass $1 billion in sales.

Goldman Sachs’ $40 million investment helped fund the acquisition of 73 Applebee’s units. In 2005, Weston Presidio acquired the interest from Goldman Sachs for an undisclosed amount.

In 2011, Goldman Sachs reinvested in FRG through its GS Capital Partners arm, though Weston Presidio remained an investor. At the time, FRG had grown to include 270 units of the Applebee’s brand in 11 states.

Though both groups will exit from FRG, Sean Honey, a Weston Presidio partner and managing partner of affiliated private equity firm Main Post Partners, will remain on the franchise company’s board.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout