Continued Private Equity Investments in Restaurants

two people with white Dunkin' Donuts paper cups

Dunkin’ Brands is in talks to sell itself to private equity-backed Inspire Brands, reported The New York Times (Oct. 25).

The deal would take Dunkin’ Brands private at a price of $106.50 a share, according to people familiar with the matter. The price would be a 20% premium over the company’s closing price on Oct. 23—implying a valuation of about $8.8 billion.

In a statement on Oct. 25, Dunkin’ Brands said, “Dunkin’ Brands confirms that it has held preliminary discussions to be acquired by Inspire Brands. There is no certainty that any agreement will be reached. Neither group will comment further unless and until a transaction is agreed.”

The transaction would add Dunkin’ Brands, whose 21,000 outlets are all franchised, to Inspire’s portfolio, which includes Arby’s, Buffalo Wild Wings, Sonic, and Jimmy John’s.

Dunkin’ has been private before, being previously owned by a consortium of private equity firms led by Bain Capital, Carlyle Group, and Thomas H. Lee Partners—who acquired Dunkin’ Donuts from Pernod Ricard in a $2.4 billion deal in 2005. The firms then took it public six years later.

Inspire is backed by private equity firm Roark Capital, which also invested $200 million in publicly-traded Cheesecake Factory this year, reported Institutional Investor.

“This transaction not only meaningfully enhances our liquidity position to navigate the near-term COVID-19 landscape and get our affected staff members back to work as soon as practicable, but also importantly, solidifies our ability to manage the business for the long-term for all of our stakeholders once we emerge on the other side of this crisis,” said David Overton, Cheesecake Factory’s chairman and CEO. “Roark’s investment underscores the strength of our brands, market positioning, and long-term growth prospects.”

Food and restaurants represent the largest sector for Roark. In March, Pitchbook analysts predicted that buyout firms would increasingly invest in private deals with public companies in need of cash amid COVID-19.

During the pandemic, Dunkin’ has had to adapt as morning commutes and coffee runs became disrupted. However, the company noticed a new emerging theme: customers are treating themselves, reported CNBC (Oct. 23).

Customers are beginning to select beverages that are harder to make at home as cold and specialty drinks took off during the summer. Dunkin’ is hopeful the trend will continue with new menu items like Planet Oat Oatmilk at all U.S. locations, and the permanent addition of Refreshers—both of which are bringing in a younger and more female demographic.

“When we look to the future, we are trying to build off of our core coffee heritage and leaning into ways to make it a bit more modern and relevant,” said Jill Nelson, Dunkin’s VP of marketing strategy.