The massive sale process of NPC International’s more than 1,300 restaurants is nearing completion following separate asset purchase agreements with Flynn Restaurant Group and Wendy’s International.
PNJ submitted a request bankruptcy protection in July 2020, citing COVID-19 as having a cumulative effect on ongoing issues. Since then, the question has been what will happen to all the restaurants belonging to the second largest franchise group of Franchise Times Restaurant 200, our list of top restaurant franchisees.
During the auction process, Flynn Restaurant Group – already the largest group of franchisees on the list –bid on the whole company as a “hunting horse” tenderer. This set the auction floor at $ 816 million. This process was quickly canceled and now, after lengthy negotiations, an agreement appears to be in place.
Flynn Restaurant Group will take over all of the more than 925 Pizza Hut restaurants, up from 1,229 NPCs reported at the end of 2019. Flynn will also take over nearly 200 Wendy’s locations in Salt Lake City, central Maryland and two areas of Baltimore markets. In total, Flynn paid $ 522.5 million for the restaurants. This works out to about $ 475,000 per restaurant, including Pizza Hut and Wendy’s. And there are other fees. Flynn will also pay for restaurant-level cash, inventory, and $ 8 million in pre-agreed construction costs for the many NPC restaurants in a certain phase of construction. NPC acquired 140 Wendy’s restaurants in 2017 as part of an aggressive update deal.
The deal, if approved, will make Flynn the largest operator of Pizza Hut, Applebee’s and Arby’s. It also operates over 130 Panera locations and over 260 Taco Bell locations.
Jon Weber, CEO and President of the Pizza Hut division of NPC International, said this was a positive result for Operation Pizza Hut.
“We are confident that NPC’s Pizza Hut restaurants will be in very good hands as part of the Flynn Restaurant Group,” Weber said. “We have developed great teams at our Pizza Hut restaurants across the country, and I am extremely proud of how our organization has come together in 2020 and maintained its commitment to providing excellent quality and service.
A big point of contention during the transaction – and what brought it to a standstill and mediated – was the potential conflict of interest in Flynn operating Arby’s and Wendy’s restaurants. Wendy’s would have viewed the brand as direct competition. Obviously, they came to an agreement, but that was the likely cause of the division of NPC’s restaurants between Flynn and a group of “pre-qualified franchisees,” according to legal documents.
The other 194 restaurants involved in the bankruptcy proceedings were divided among this group. Delight Restaurant Group has received 54 Wendy’s in the Raleigh, North Carolina market. Legacy Restaurant Group will have 35 Wendy’s restaurants in the Kansas City market and Yellow Cab Holdings will have 54 restaurants in the Pennsylvania market. Schmidt Family Restaurant Group and Superior Restaurant Group will each occupy half of the 51 restaurants in the Greensboro market. In total, the group paid $ 248,250,000 for the 194 locations, likely with fees similar to what Flynn will pay on top of that. This equates to a price tag of $ 1.2 million per Wendy’s location.
“This is a great result for NPC’s Wendy’s restaurants and our team,” said Carl Hauch, CEO and President of the Wendy’s Division of NPC International. “We are very pleased that our restaurants are joining the ranks of the well-established and successful restaurant franchise groups. We are grateful to Judge Isgur for his guidance during the mediation process and to Wendy’s, Flynn, the Acquiring Franchises of Wendy’s and our lenders for working diligently to achieve this outcome.
Greg Flynn, founder and CEO of the San Francisco-based Flynn Restaurant Group, said it would be another big step in what he called the state and federal model the operation of the large catering organization.
“Flynn Restaurant Group has grown our business over the past 20 years focusing on running top quality operations with large teams of people in top notch restaurant concepts,” said Flynn. “The Pizza Hut and Wendy’s restaurants that we have agreed to acquire from NPC align perfectly with this strategy, and we are confident that the new members of our team will fit perfectly into the Flynn Restaurant Group.”
A final sales hearing will take place on January 15 and objections can be raised until January 11. Given the current status of the deal, it is unlikely that there will be any significant changes. The deals are expected to close by the end of the second quarter of 2021. The buyers of both deals have agreed to offer employment to all of the restaurant’s employees, in the field, and to “virtually all” of the other non-field employees at NPC International.