Burger King Corp. and Carrols Restaurant Group Inc., the chain's largest franchisee, have entered into an agreement for the purchase by Carrols (through its operating subsidiary Carrols LLC) of 278 BKC company-owned restaurants in the Ohio, Indiana, Kentucky, Pennsylvania, North Carolina, South Carolina and Virginia markets.
As a part of the transaction, Carrols will lead the Burger King system in its remodeling program by committing to remodel approximately 450 restaurants throughout the next three and a half years, to the brand's 20/20 restaurant image.
During Burger King's most recent earnings call earlier this month, Daniel Schwartz, chief financial officer, said 1,000 restaurants are committed to the chain's lower-cost 20/20 reimaging program, and they are expected to be completed within the next 12 to 18 months. Currently, there are 236 restaurants in the system that boast the new design.
Schwartz said the company is seeing double-digit increases from the remodeled units.
Carrols is in the process of completing its spin-off to the shareholders of Fiesta Restaurant Group Inc., which owns and operates its Pollo Tropical and Taco Cabana restaurant brands.
The acquisition of BKC's restaurants is expected to close following the completion of the spin-off, financing is available to fund the restaurant remodeling program, cash is paid to BKC in connection with the transaction, and refinancing is acheived through Carrols LLC's existing senior secured credit facility.
Upon completion of the transactions, Carrols will only operate Burger King restaurants and will become the system's largest franchisee globally with 575 units. Carrols anticipates that the spin-off of Fiesta will be complete in April.
- Total consideration to BKC will include a 28.9 percent equity interest in Carrols, after the spin-off of Fiesta, and total cash payments of approximately $15.8 million. The cash consideration is for refranchising fees of $9.4 million, inventory of approximately $2.5 million and payments to be made over five years by Carrols in conjunction with BKC's assignment to Carrols of its right of first refusal on sales of Burger King restaurants by existing franchisees in 20 states.
- Schwartz and BKC's president, North America Steve Wiborg will join Carrols' board of directors upon completion of the transaction.
"We are very excited to further solidify our relationship with our long-time franchisee Carrols Restaurant Group," Wiborg said. "Carrols has a proven track record of running industry-leading restaurants and has demonstrated a long-term commitment to the Burger King brand. Their leadership, operational expertise and commitment to upgrade the image of their restaurants across the country will greatly contribute to our efforts to provide our restaurant guests with friendly service and quality products served in a fresh, new environment."
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