Operators looking to pick up large numbers of restaurants from franchisors or franchisees may want to consider the pre- and post-acquisition strategies of companies such as Heartland Food Corp., which recently acquired 121 Burger King units.
In May 2011, Heartland Food Corp., of Downers Grove, Ill., purchased through a bankruptcy auction 40 Minneapolis market Burger King restaurants previously operated by Duke & King Acquisition. And this past summer, it purchased from franchisor Burger Worldwide Inc. 51 Burger King restaurants in and around Omaha, Neb., and 27 in the Nashville, Tenn., market, and likewise picked up 43 units from a Chicago-area BK franchisee CH James Restaurant Holdings. In all, the company, which had 2011 net sales of $278 million, now operates 415 Burger King restaurants in eight U.S. states and Canada, and is the chain’s second largest franchisee.
Christopher J. Ondrula, chief executive of Burger King franchisee Heartland Food Corp., of Downers Grove, Ill., recently shared with Nation’s Restaurant News how his company handles what it calls the “Heartlandization” of acquisition targets.
Heartland’s Ondrula answered NRN’s questions about his company’s acquisition practices and its detailed “spruce-up plan” that he said “demonstrates to our customer base that the restaurants are under new ownership” and “often results in vastly improved [employee] morale.”
What are some key aspects of your pre-purchase due diligence and post-acquisition assessment processes?
I make it a point to visit each Burger King location personally in order to assess current operations, site location quality and the overall operational opportunity that exists in the market. We then schedule a separate visit for our facilities department to determine repair and maintenance requirements. We also review store-level P&Ls in detail and layer over the company P&Ls with the Heartland P&L to determine the financial opportunities that exist. Finally, we interview above-restaurant-leaders and key management personnel to determine the strength of the current team.
Our initial visits are discrete, so post-acquisition is really our first opportunity to determine, in detail, operational strengths and weaknesses and repair and maintenance needs.
What are the top five steps taken to move acquired operations and facilities in the direction desired by your group?
In no particular order the top five are:
1. Install a Burger King Worldwide-approved point-of-sale system and Heartland proprietary back–of–house software to provide detailed visibility into food costs so that we can determine very quickly where the opportunities exist to improve food cost variance.
2. Deploy teams from the [Heartland] restaurant support center and our "gold-standard" field personnel to the acquired markets in order to train our new employees on Heartland policies and procedures and ensure proper food safety certifications. Our deployment teams then certify each manager as fully trained on those policies and procedures and what it means when we say that our employees provide "Service from the Heart."
3. Have facilities teams work hand-in-hand with management in the newly acquired markets to create detailed lists of deferred repair and maintenance [projects] so that those issues can be addressed immediately.
4. Train and implement a line-bar scheduling matrix in order to insure proper staffing and optimize operational performance.
5. Deploy local-store-marketing initiatives designed to be easy to implement operationally and introduce our customers to improved/upgraded facilities, operations and personnel.
About how long does it take for your organization to assimilate the restaurants it acquires?
After 90 days it is our intention that all acquired restaurants are operating using Heartland policies and procedures, have improving metrics [and] have stabilized restaurant teams.
Has your post-acquisition strategy changed in recent years?
Traditionally Heartland's strategy has been to increase the size of its portfolio through small to mid-size acquisitions in markets where it already had a presence. This strategy allowed for the creation of a single team, deployed for a short period of time to assimilate the restaurants into the Heartland portfolio. The last two years, however, have involved much larger Burger King acquisitions, which have necessitated the creation of multiple specialized teams that are deployed into each market.
Lisa Jennings contributed to this report.
This article has been revised to reflect the following correction:
Correction: November 29, 2012 An earlier version of this article misstated in the lede when Heartland Food Corp. acquired a total of 121 Burger King restaurants from franchisor Burger King Worldwide Inc. and CH James Restaurant Holdings. Heartland acquired those restaurants this past summer, in August 2012.