Today, BurgerFi said it has a deal to buy the 61-unit Anthony's Coal Fired Pizza & Wings from L Catterton for $161.3 million or 1.5x sales for a casual dining company. L Catterton will receive $86.6 million in stock, and BurgerFi will assume $74.7 million of Anthony's debt. The deal also includes a management transition or what can be perceived as an L. Catterton's takeover of the company, with Ian Baines becoming CEO of BurgerFi. The current CEO, Julio Ramirez, will remain CEO and president of the BurgerFi brand, and Patrick Renna will become president of Anthony's brand. Post-closing the company, the company will have a total of 177 systemwide restaurants in its two brands. In a change in strategy, the company indicated that "This is our first acquisition in building an excellent multibrand platform. We are well-positioned to continue the growth of our existing BurgerFi brand and leverage our scale to unlock value from strategic acquisitions."
We recently moved BFI lower on the LONG list on its spotty execution. Nevertheless, we stuck with it, given the potential for the BurgerFi brand. However, the agreement to buy Anthony's Coal Fired Pizza & Wings and the change in strategy are concerning. Multi-branded restaurant companies are very challenging to run, and there are very few synergies to be achieved in Restaurant acquisitions. Notably, capital allocation decisions in multi-branded companies can also work against shareholders (especially companies with significant leverage.) To that point, the best restaurant companies globally (MCD, SBUX & CMG) do one thing and do it better than others. Over the years, DRI and other Casual Dining companies have tried to branch out into other brands with very little success. This deal raised several RED flags and thus stepping to the sidelines.
