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Sonic Drive-In owner agrees to acquire Dunkin’ parent for $11.3B

Inspire Brands agrees to purchase Dunkin’ Brands for $106.50 per share

Dunkin’ Brands has agreed to be acquired by Inspire Brands, a restaurant company controlled by private equity firm Roark Capital, for $11.3B, including the assumption of debt. The acquisition will take the parent of Dunkin’ and Baskin-Robbins private for $106.50 per share. Dunkin’, which posted US comp(arable) sales growth of 0.9 percent during its third quarter, has seen its business evolve during the pandemic.

With Dunkin’ Brands under its umbrella, Inspire brands will generate $26 billion in systemwide sales and operate more than 31,600 restaurants in 60+ countries.

Reports of the merger discussions had surfaced one week ago after a New York Times report on the deal was published. Dunkin’ Brands confirmed the report during the evening of October 25.

Customers have shifted visits from morning to mid-afternoon, but Dunkin’ Brands’ coffee chain’s menu innovation and customer engagement have provided resilience to the QSR chain’s sales. During the past quarter, the brand introduced Stuffed Bagel Minis, Steak and Cheese Rollups and returned the Maple Sugar Bagel Breakfast Sandwich. New items, including Matcha Latte, Croissant Stuffers, Snacking Bacon and Refreshers enhanced excitement and generated demand in the early afternoon hours, while offering incremental ticket opportunities

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For Dunkin’, June comp sales in the US were down only 9 percent while it handled transactions in to-go format and july month-to-date comp sales had turned slightly positive. A growing number of DD Perks members are also boosting recurring business for the coffee chain. Loyalty enrollment increased 110 percent year over year in 3Q 2020.

Inspire Brands should provide Dunkin’ access to a strong set of new, multi-unit operators that can help it expand and join its franchise system. Dunkin’ and Inspire Brands’ restaurant concepts are complementary since most of the latter’s are focused on the afternoon and evening daparts. Currently, Inspire owns Arby’s, Buffalo Wild Wings, Jimmy John’s, Rusty Taco, and Sonic Drive-In.

Moving forward, Atlanta-based Inspire Brands executives expect to bring to bear their company’s expertise in data analytics and leverage in media buying. There are additional efficiencies of scale and it’s not certain whether the Canton, Mass.-based office will remain intact.

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Dunkin’ Brands has an extensive and well-established network of international partners that will complement Inspire Brands’ global network. The Canton, Mass.-based company also has a unique perspective on the to-go business and operating with very small footprints—a valuable insight that could serve Inspire Brands’ 11,000 stores well into and beyond the pandemic. In addition, its Dunkin’ and Baskin-Robbins brands have near-universal recognition.

“…I am particularly proud of our actions since March of this year. During the global pandemic, we have stood tall,” said Dave Hoffmann, chief executive of Dunkin’ Brands. “We’ve had each other’s backs and are now stronger than ever. We are excited to bring meaningful value to shareholders who have been with us on this journey and believe that Inspire Brands, a preeminent operator of franchised restaurant concepts, will continue to drive growth for our franchisees while remaining true to all that is unique and special about the Dunkin’ and Baskin-Robbins brands.”

The $11.3B deal is subject to shareholder and regulatory approval. Dunkin’ and Baskin-Robbins will become the sixth and seventh brands in the Inspire Brands restaurant portfolio and the first pure-play QSR brands to join the company.

“By joining Inspire, these brands will add complementary guest experiences and occasions to our current portfolio,”.said Paul Brown, co-founder and chief executive of Inspire Brands.

Dunkin’ Brands has agreed to be acquired by Inspire Brands, a restaurant company controlled by private equity firm Roark Capital, for $11.3B, including the assumption of debt
Dunkin’ Brands’ Dunkin’ has a near-universal presence and brand recognition. Photo by Dunkin’ Brands.

Against the backdrop of the COVID-19 pandemic, large restaurant chains with robust backing and cash flow are making moves in a chess game that will determine the future dominance of well-recognized restaurant brands. It’s feast or famine, and the same game is playing out in real time with multi-unit independents versus struggling single-unit operators in America’s Main streets.

Multi-unit operators can develop efficiencies of scale and cross-utilize personnel and resources in easier fashion than single-unit operators, regardless of size or regional or national scale.

Barclays served as financial advisor to Inspire Brands, while Paul, Weiss, Rifkind, Wharton & Garrison LLP provided legal counsel. BofA Securities, Inc. was financial advisor to Dunkin’ Brands. Ropes & Gray LLP provided legal counsel to the company.

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Dunkin’ Brands operates 12,500 Dunkin’ stores and 8,000 Baskin-Robbins points of distribution. Some stores are co-branded and located within a single shop. Technology enhancement to its mobile app and the build-out of its new Next-Gen stores that are designed for order-ahead pickup have solidified the brand as a convenient and frictionless place to get coffee and a quick bite to eat.

Photo credit: Dunkin’ Brands, Inspire Brands (inline)

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