Archer Capital acquisition of chicken franchises to fuel expansion
Tuesday, June 14, 2011/
Private equity group Archer Capital says it plans to double the number of Red Rooster stores in both NSW and Victoria, following its $450 million acquisition of parent company Quick Service Restaurant Holdings.
In what is believed to be the largest deal of its kind this year, Archer Capital purchased QSRH from its rival Quadrant Private Equity.
The purchase of QSRH, which also operates the Oporto and Chicken Treat chains, brings Archer’s total spending on acquisitions to more than $1 billion since the start of last month.
Archer will own 90% of QSRH while the current management will own 10%. Archer Capital partner Peter Gold says the company plans to open 250 new stores under all three banners over the next three to five years.
“We like food retail and quick-service restaurants. We definitely see growth potential and will expand the footprint of stores in Australia, with some international expansion,” he says.
QSRH is in the process of opening Chicken Treat stores in China, while Oporto has expanded into the United Kingdom and is also opening outlets in China and the United States.
QSRH chief Mark Lindsay told The Australian the company also wants to add to the number of Red Rooster outlets in NSW and Victoria, which have a combined 80 stores.
“We can double that number quite comfortably in the next five to 10 years,” Lindsay said.
He said the Chicken Treat chain, which has 100 stores in WA, five in Queensland and one in Tasmania, would also expand in the eastern states.
Meanwhile, Quadrant managing director Chris Hadley says he had been planning a public float of the company before Archer came in with its offer. He says his company has done well from the sale.
“We made a good profit – we had the asset for four years and grew the portfolio from 450 outlets to 620. The time is right to exit the asset and cycle the cash back to our investors,” he says.
The company stands to make a return of more than three times its $110 million equity investment for its venture into the fast-food sector.
Quadrant – which successfully floated its investment in outdoor retailer Kathmandu two years ago – purchased the Red Rooster and Chicken Treat chains from WA entrepreneur Nick Tana in 2007 for around $180 million.
Quadrant took a 75% stake in the business while management held a 15% stake, and existing shareholder Frank Romano retained a 10% stake.
Romano, former managing director of Australian Fast Foods, teamed up with Tana to purchase Red Rooster from Coles Myer in 2002 before enlisting Quadrant’s help to buy him out.
In 2007, Quadrant paid $60 million for the Oporto chain and rolled it in with Red Rooster under the renamed QSRH structure.
QSRH estimates that sales from franchise and company-owned stores will be about $700 million in 2011, up from $650 million in 2010.