Dive Brief:

• High Bluff Capital Partners, which is supported by alternative investment funds managed by FS Investments, has agreed to purchase Church's Chicken from FFL Partners, according to an announcement Monday. The transaction is expected to close during the third quarter. Terms of the transaction and pricing were not disclosed.
• FFL Partners bought Church's Chicken in 2009, and has been seeking a sale since 2019 at a reported market price of about $350 million.
• This marks the third acquisition High Bluff has made since it established Rego Restaurant Group in 2018 with the purchase of Quiznos and Taco Del Mar.

Dive Insight:

Over the last five years, Church's Chicken has been working to revamp its brand. In 2016, the company began a three-year strategic plan to improve operations domestically and internationally and bolster its U.S. image by creating new packaging and uniforms. These efforts helped push sales to over $1 billion in 2019, the same year it boasted 20 consecutive weeks of positive comp sales.

That momentum continued into 2020 despite pandemic-induced dining room closures. The chain relied on delivery and to-go orders and leveraged its family meals and digital offers to generate systemwide sales of nearly $1.2 billion last year, according to the announcement. The QSR expects to continue its brand expansion domestically and internationally with over 100 new locations.

For Anand Gowda, founder of High Bluff Capital Partners, Church's Chicken has significant growth potential. The chain has already invested billions of dollars in marketing and has the opportunity to transform itself in a way that is unique, he said. The growth of the chicken market has also been fantastic, and Church's has the opportunity to innovate around its products, he said. Church's Chicken was a bit late to the chicken sandwich trend, for example, Gowda said. 

"When you look at things like LTOs, we want them to be very cutting edge, trendy and [to] generate sales for the franchisee and profit for the franchisee that enables them to be successful," Gowda said. "And I think part of that is finding new ideas that resonate with the customer."

Those new ideas could come from reviewing U.S. flavor profiles, determining what the consumer wants and then driving innovation around that. It could also mean taking the strength of Church's international menu and bringing that to the domestic stores, he said. 

Under High Bluff's Rego Restaurant Group, Church's Chicken could have the opportunity to evolve. Rego partnered with Ghost Kitchen Brands earlier this year to bring 70 Quiznos and Taco Del Mar units to U.S. Walmart locations and other ghost kitchen locations in 2021. Gowda said partnerships with ghost kitchens that don't violate Church's Chicken franchisee territories would allow consumers a new way to access that brand. The company also has overseen a new store redesign at Quiznos, which launched in March in Wisconsin with a new interior that includes an area to pick up online orders.

Church's Chicken could also benefit from a loyalty program, which it doesn't yet have, Gowda said, adding that these platforms help restaurants understand their diners in a nuanced way. 

"Our investment strategy continues to center on identifying brands with long-term connections with consumers that can be energized and propelled to greater success through targeted industry expertise, operational efficiencies, innovation and creative brand management," Gowda said in a statement. "Church's fits squarely within this wheelhouse. We look forward to leveraging our robust platform and working closely with the management team and franchisees to accelerate Church's positive trajectory."

This latest acquisition builds upon pent-up M&A activity in the restaurant segment, which slowed to a halt during 2020 with the future of the industry in question. Low interest rates, plenty of capital and restaurants showing strong recovery have led to a flurry of deals this summer. In June and July, there were a total of eight restaurant transactions announced.

This article has been update with an interview with High Bluff Capital Partners Founder Anand Gowda.