The restaurant sector was hit hard by the COVID-19 pandemic, with many companies that relied on dine-in guests seeing significant revenue declines. Companies that had strong drive-thru sales and third-party delivery services saw strength in different times of the pandemic.
Recent Deals, IPOs: Activity in restaurant stocks has also picked up on the public markets with several IPOs and deals announced.
Del Taco is the second-largest Mexican QSR chain by units, with over 600 locations in 16 states.
Firehouse Subs is set to be acquired by Restaurant Brands International QSR for $1 billion recently, in a move that will diversify the owner of Burger King and Tim Horton’s. The company has been actively pursuing acquisitions. Firehouse Brands has over 1,200 units in 46 states, which are 97% franchised.
Fast casual brand Portiollos Inc PTLO went public in October and now has a market capitalization of $1.3 billion.
Panera announced plans to return to the public markets with an IPO that includes early access to USHG Acquisition HUGS investors. The SPAC will be a “cornerstone partner” on the IPO and its Chairman Danny Meyer will join Panera’s Board of Directors.
With the recent activity in the restaurant space, here are several companies that could be considered acquisition targets.
Bloomin Brands: Outback Steakhouse parent company Bloomin Brands Inc BLMN has been discussed as a buyout candidate for years. The latest reports from Dealreporter say activist investors are pushing for a potential sale. Bloomin also owns Carraba’s Italian Grill and Bonefish Grill. The company has over 1,450 restaurants in 47 states and more than 20 countries.
BJ’s Restaurants: Casual dining company BJ’s Restaurants Inc BJRI operates as a pizzeria and brewhouse. The company saw third quarter sales increase 42% as more people returned to restaurants. BJ’s has 212 restaurants in 29 states, with a goal of hitting over 425 locations in the United States. With a market capitalization of $756 million and shares closer to their 52-week low, the company could look ripe for a buyout.
El Pollo Loco: Combining QSR and fast casual, El Pollo Loco Holdings Inc LOCO sees itself as QSR+, a segment offering the best of both sectors. The chain has 475 company owned locations and has been rumored as an acquisition target by Dealreporter before. El Pollo Loco recently announced the resignation of its CEO. The company is currently being led by its interim CEO, who also serves as the Chief Financial Officer.
Now could be the perfect time for the company to look at buyout offers it may have received. Shares traded up by 6.5% on Monday but are still near their 52-week low. The company has a current market capitalization of $494 million.
Fiesta Restaurant Group: Pollo Tropical owner Fiesta Restaurant Group FRGI is a potential restaurant acquisition given its low market capitalization, room for expansion and past sale experience. The company has 138 company owned locations and 31 franchised locations in the U.S. and several countries.
Fiesta completed a sale of its Taco Cabana brand in the third quarter, leaving it with just the Pollo Tropical brand. The company’s market capitalization is over $260 million.
Potbelly Corp: Sandwich shop brand Potbelly Corp PBPB could find itself an acquisition target eight years after going public. Shares of Potbelly were offered at $14 in its IPO and more than doubled in their first day of trading. Since that time, shares have fallen and now trade at $5.59, giving the company a market capitalization of around $160 million.
The company has seen its average unit volume rise for three consecutive quarters and saw same store sales up 33.7% in the third quarter, which could signal a rebound. The company has over 400 company owned stores, which could make Potbelly a play on moving to a franchise model under new ownership.
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