Dive Brief:
- Taco Bueno has completed its sale to Taco Supremo, a Sun Holdings affiliate, and successfully emerged from its financial restructuring. Through the restructuring process, Taco Bueno has improved its financial position and established a sustainable capital structure, according to a press release.
- The multi-unit franchise owner plans to invest in remodeling and customer experience initiatives at Taco Bueno as part of its post-bankruptcy turnaround.
- Sun Holdings owns and operates over 800 restaurants across eight state and multiple brands, including Burger King, Arby's, Popeyes and Krispy Kreme.
Dive Insight:
Sun Holdings could very well provide the right spark to reignite the brand's fire, especially after Taco Bueno filed for bankruptcy protection and closed 16 locations across Texas, Oklahoma, Kansas and Missouri. In a statement, Sun Holdings CEO Guillermo Perales said his company has a proven track record of successfully growing brands.
His résumé backs up that claim. Peralas has been named a Golden Chain Award winner and a part of Nation’s Restaurant News' Power List. Sun Holdings — one of the largest Hispanic-owned businesses in the country — has grown revenue by 50% a year since its creation in 1997.
Sun Holdings has its work cut out. Prior to its bankruptcy filing, the company garnered quite a bit of debt — $130 million, according to Restaurant Business. The chain's woes were further exacerbated by record rainfall in Texas, which led to a 20% decline in sales.
Sun Holdings seems like the perfect fit to guide the chain into the black. Though it already operates six restaurant brands across eight states, Taco Bueno will be the first chain included in its portfolio in its entirety. Broken down by brand, however, that doesn't seem out of place. The company currently owns twice as many Burger Kings (296) and about the same amount of Popeyes (145), according to QSR Magazine.
The franchisee's footprint also is big enough to compete with major restaurant brands. Outback Steakhouse, Culver's and Cracker Barrel are just a few concepts that have a smaller unit count than Sun Holdings.
Its acquisition fits a general trend across the industry — investors and private equity firms are bullish on consolidation, especially as lending rates remain low. This latest acquisition is part of a significant period of brand consolidation, moving at a rate the industry has not seen before. Consolidation offers a number of benefits, including group purchasing, economies of scale and the reduction of central costs. Further, consolidation is becoming one of the only ways left to grow in a saturated market.
The Taco Bueno acquisition also adds a new category to Sun Holdings’ diverse portfolio, which will better enable the company to compete in an intense environment. The Tex-Mex QSR category isn't too crowded, but Taco Bueno is the lowest on the Technomic Top 500 chains list — behind Taco Bell, El Pollo Loco, Del Taco and Taco Cabana — at No. 177. It has plenty of room to grow. In the release, Taco Bell CEO Omar Janjua called the acquisition a new beginning, so there is optimism that the chain is well positioned now to do just that.
