Private-Equity Firm Sentinel Capital Deals Huddle House | Food Newsfeed
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Huddle House
Huddle House is coming off one of its best years in recent history.

Private-Equity Firm Sentinel Capital Deals Huddle House

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The 54-year-old brand was purchased by the firm in 2012.
By Danny Klein February 2018 Chain Restaurants

Private-equity firm Sentinel Capital Partners announced Thursday it has sold Huddle House, Inc., the leading franchisor of the 54-year-old family-dining chain, to Elysium Management. Terms of the deal were not disclosed.

Sentinel has been busy in the restaurant space lately. The chain purchased 530-unit quick-service brand Captain D’s in December and sold Checkers/Rally’s for $525 million to Oak Hill Capital Partners in March. Elysium is an investment firm involved in managing the assets of Leon Black, the co-founder of private-equity firm Apollo Global Management. Apollo purchased fast-casual Mexican chain Qdoba in December from Jack in the Box for about $305 million in cash.

Sentinel purchased Huddle House in April 2012 when it had 393 units. The Atlanta-based brand, which was founded in 1964, now has 349 restaurants generating more than $240 million in annual systemwide sales.

“Working closely with Huddle House’s talented management team has been a great experience,” said Jim Coady, a partner at Sentinel, in a statement. “Throughout our ownership, Huddle House has achieved impressive, system-wide operational results that have increased efficiency and improved productivity at the individual restaurant level.”

Sentinel said Huddle House’s average-unit volume increased 14 percent in the past six years.

“Sentinel has been a great partner to Huddle House and over the past six years, has helped us set and achieve meaningful strategic milestones,” said Michael Abt, CEO of Huddle House, in a statement. “Our customers, franchisees, operators, and employees are super excited about Huddle House’s future."

Huddle House is coming off its most impressive growth spurt in 15 years, according to the brand. In fiscal 2017, the chain signed 36 new franchise agreements to open new locations across the country, and entered new markets across 14 states. The restaurant finished the year with 401 stores open or in development, including its first location in Maryland and additional growth in New Jersey—an area that has one unit open and five in development.

And much of this growth has come from within the system. Huddle House said a third of those 36 new franchise agreements were signed by current franchise partners.

The company opened a new real estate department with full-site selection support and updated its store design. The in-house supply distribution model “that supports favorable unit-level economics for each of the locations,” which has been in place for nearly three decades, continues to bolster growth, Huddle House said.

Eight multi-unit operators signed additional agreements to open 22 additional locations, the company added.

The redesign, called the “Evolution” model by Huddle House, is outperforming the previous store design by 31.5 percent in sales, the company noted in July. A little more than 50 percent of the system was remodeled at the time, and Huddle House said it expected about 63 percent to complete by the end of 2017. The new design features a new building prototype, LED lighting, updated menu offerings, and contemporary furniture.

In January 2018, Sentinel also announced the closing of its $2.15 billion sixth private equity fund and its $460 million inaugural junior capital fund.

Since being founded, Sentinel Capital Partners has made eight franchise investments in the restaurant business. They include: Border Foods, a leading franchisee in the Taco Bell system; Falcon Holdings, one of the largest Church’s Chicken franchisees; Fazoli’s Group, a franchisor of the leading Italian chain; Huddle House; Newk’s Eatery; Southern California Pizza Company; TGI Fridays; and Checker’s/Rally’s.

Harris Williams & Co., a middle-market investment bank, advised Huddle House on the sale. “Huddle House’s focus on the breakfast daypart and unique position in underserved markets has differentiated the brand over its 50 year history,” said Brant Cash, a director at Harris Williams & Co., in a statement. “Under Sentinel’s ownership, management revitalized the brand and strengthened the company’s franchise platform to accelerate growth and position Huddle House for continued success.”

“The M&A market continues to demonstrate high interest in strong franchise concepts that generate robust cash flow streams,” added Glenn Gurtcheff, a managing director at Harris Williams & Co., in a statement. “Restaurant brands with proven and growing franchise platforms are attractive assets in today’s marketplace.”