- A Yum Manufacturers exec mentioned the corporate was “scanning classes” that do not compete with its manufacturers.
- “The Mediterranean-foods house is attention-grabbing,” Chris Turner mentioned at a JPMorgan convention.
- The analyst Mark Kalinowski recognized seven chains that Yum Manufacturers might goal for an acquisition.
Yum Manufacturers, which owns Taco Bell and KFC and whose most up-to-date acquisition got here on the onset of the pandemic, is on the lookout for one other model to purchase, presumably a Mediterranean chain, Chris Turner, its chief monetary officer, mentioned at a current investor convention.
“We’re retaining our eyes open,” Turner mentioned on the JPMorgan US All Stars Convention on September 20. “We’re at all times scanning classes. The Mediterranean-foods house is attention-grabbing. There’s a number of attention-grabbing classes on the market that we’re finding out.”
Mark Kalinowski, a veteran business analyst, mentioned that with valuations sputtering in a troublesome macroeconomic local weather, it is not shocking that Yum Manufacturers could be trying to increase its portfolio. Earlier this 12 months, Kalinowski advised that Restaurant Manufacturers Worldwide, the proprietor of Burger King and Popeyes, was trying to purchase an enormous fast-food model.
“When you’re an acquirer, now could be the clever time to drag the set off,” Kalinowski instructed Insider in an interview. “When you have a long-term outlook, do you actually care if we’re going into recession six months from now?”
Turner mentioned Yum Manufacturers opened a brand new retailer each two hours in 2021. The corporate and its franchisees personal and function greater than 53,000 eating places in 155 nations beneath the model names Taco Bell, Pizza Hut, KFC, and Behavior Burger Grill.
Behavior was Yum Manufacturers’ newest acquisition — it bought the fast-casual chain in March 2020 in a deal valued at $375 million. Kalinowski mentioned that the burger chain from California crammed a gap in Yum’s portfolio and {that a} Mediterranean purchase might do the identical.
“If Yum Manufacturers decides to go Mediterranean, it is a wager on the way forward for the section itself,” Kalinowski mentioned.
The founding father of Kalinowski Fairness Analysis wrote a notice final week about potential acquisition targets for Yum Manufacturers. In a follow-up interview with Insider, he mentioned Yum Manufacturers might additionally go after a espresso firm.
“Yum would not personal any espresso ideas, and low is massive,” he mentioned.
Yum Manufacturers declined to touch upon Turner’s feedback.
Kalinowski recognized seven chains that may very well be a very good match for Yum Manufacturers, together with Cava and Dutch Bros Espresso. (Items, gross sales, and AUVs, or common yearly gross sales per retailer, had been obtained from Datassential’s 2022 “Firefly 500” report.)
Fb/Zöe’s Kitchen
Cava Group (Cava and Zoe’s Kitchen)
2021 models: 168 (Cava), 124 (Zoe’s Kitchen)
2021 gross sales: $168.2 million (Cava), $206.8 million (Zoe’s Kitchen)
Common unit quantity: $1 million (Cava), $1.7 million (Zoe’s Kitchen)
Background: In 2018, Cava Group, the proprietor of Cava, purchased Zoe’s Kitchen in a deal valued at $300 million. Cava, a fast-casual chain usually described because the Chipotle of Mediterranean meals, took the publicly traded Zoe’s non-public and commenced rebranding some shops as Cava. On the time of the acquisition, the mixed chains encompassed 327 eating places in 24 states. That quantity has decreased to 292, in line with Datassential’s 2022 “Firefly 500” report.
Kalinowski’s take: Kalinowski mentioned the Cava Group ideas are “the almost certainly Mediterranean ideas that Yum Manufacturers might purchase, ought to it select to maneuver inside that class.” He added: “They’re the 2 largest ideas throughout the Mediterranean sector, and of those 5 ideas, Zoe’s Kitchen generates the biggest common unit volumes. Mediterranean is a rising house as a result of it carries a wholesome halo, and other people do appear in some methods to be gravitating, ever so slowly, to consuming a bit more healthy.”
Hollis Johnson/Enterprise Insider
The Halal Guys
2021 models: 88
2021 gross sales: $121.9 million
Common unit quantity: $1.4 million
Background: The Halal Guys, which began within the Nineteen Nineties as a New York Metropolis meals cart, is understood for its chicken-and-rice platters drowned in white sauce. The corporate started franchising in 2014.
Kalinowski’s take: He gave this model an out of doors likelihood of getting snapped up. “It is scrumptious meals, little doubt about it. It simply would not carry a wholesome halo,” he mentioned. “I am undecided Yum Manufacturers is focused on any previous Mediterranean idea. My guess is they need one thing that when individuals take into consideration the model they are saying, ‘I can eat wholesome there.'”
Pita Pit
2021 models: 116
2021 gross sales: $55.1 million
Common unit quantity: $475,000
Background: Pita Pit was based in 1995 in Kingston, Ontario, by Nelson Lang, whose imaginative and prescient was to supply a wholesome different to fast-food eating places. Pita Pit USA was created in 2005. The chain sells build-your-own bowls, salads, gyros, and hen souvlaki.
Kalinowski’s take: He mentioned that whereas Pita Pit is a small chain with a vastly decrease AUV than the remainder of the ideas on this listing, “possibly that is a possibility” for Yum Manufacturers to develop the idea.
Luna Grill
2021 models: 48
2021 gross sales: $57 million
Common unit quantity: $1.2 million
Background: The San Diego-based fast-casual chain was based in 2004 and is understood for its marinated grilled kabobs. The chain says it makes use of sustainably raised meats and non-GMO components.
Kalinowski’s take: He mentioned Luna Grill’s menu “appears to me extra in keeping with one thing that Yum Manufacturers could be focused on,” including, “In the end you need one thing with very wholesome unit economics.”
Getty Photographs
Dutch Bros Espresso
2021 models: 538
2021 gross sales: $433 million
Common unit quantity: $805,000
Background: Dutch Bros Espresso, based mostly in southern Oregon, operates drive-thru espresso retailers that promote espresso-based drinks and different specialty espresso drinks. The chain, based in 1992, went public in September 2021. It was value $5.6 billion after the preliminary public providing, in line with Bloomberg.
Kalinowski’s take: In March 2021, earlier than Dutch Bros went public, Kalinowski mentioned Yum Manufacturers must be on the lookout for its subsequent acquisition within the profitable espresso/cafe section as a result of a number of the ideas, comparable to Starbucks, “take pleasure in very excessive buyer frequency.”
“It’s arguably essentially the most habit-forming menu merchandise to be discovered anyplace within the restaurant business,” he wrote in a notice that 12 months.
He instructed Insider that concentrating on Dutch Bros when it was privately held in early 2021 would’ve “made essentially the most sense.”
“Now it is publicly traded,” he mentioned. “It has a market cap greater than I might have anticipated, so it would be an costly buy for Yum Manufacturers.”
Biggby Espresso
2021 models: 266
2021 gross sales: $217.9 million
Common unit quantity: $820,000
Background: The Michigan-based espresso chain opened its first store in East Lansing in 1995.
Kalinowski’s take: He identified that Biggby is “a lot smaller” than Dutch Bros, including, “I am undecided it has the enchantment of Dutch Bros and model positioning inside that section that is distinctive.”
Nonetheless, Kalinowski mentioned that given the recognition of espresso manufacturers, including a espresso idea like Biggby “would fill part of the model portfolio that Yum Manufacturers doesn’t have.”
“And once more, it is only a significant a part of the general restaurant business now,” he mentioned. “Discovering an idea that may compete in that house isn’t the dumbest factor on the earth.”