Southern California Pizza Company was formed in 2008 to operate Pizza Hut and Wing Street restaurants in the Los Angeles metropolitan area. The company owns 123 units, making it one of the 10 largest Pizza Hut franchisees in the country. Southern California Pizza is a portfolio company of Sentinel Capital Partners, a private equity firm specializing in smaller middle-market food and restaurant, franchising, consumer product, manufacturing and service companies.
- 面临的难题
-
From a single Wichita pizzeria opened in 1958, Pizza Hut grew to become the first national pizza restaurant chain. Today, there are more than 7,500 Pizza Hut restaurants in the U.S. and over 5,300 in close to 100 other countries, making Pizza Hut the choice of pizza lovers the world over.
Pizza Hut is a subsidiary of Yum! Brands, which also owns the A&W, KFC, Long John Silver’s and Taco Bell brands. As of May 2008, about 80 percent of U.S. Pizza Hut restaurants were owned and operated by 144 franchise groups. As part of a larger business strategy, Yum! Brands plans to reduce the number of its company-owned stores by selling restaurants to existing and new franchisees.
As a leading private equity firm with quick service restaurant experience, Sentinel saw the potential of a successful partnership with Pizza Hut in Southern California. Sentinel previously had a sizeable stake in Border Foods, a leading franchisee of Taco Bell, another Yum! Brands’ chain, and had also owned one of the largest Church’s Chicken franchisees. Sentinel hoped to repeat its two prior successes by acquiring the Pizza Hut restaurants in central LA and California’s Inland Empire.
But with the U.S. economy in a downturn in mid-2008, many lenders were reluctant to finance restaurant acquisitions because they feared Americans would reduce their restaurant and takeout spending, at least in the short term. To finance its Pizza Hut acquisition, Sentinel needed to find a financing partner with a longer-term view backed by the knowledge, experience and commitment to support their ambitious plans.
- 解决方案
-
Through its ongoing dialogue with Sentinel, CIT Sponsor Finance learned of the firm’s interest in the Pizza Hut transaction and brought in financing professionals from the CIT restaurant industry practice to work on the financing package.
With its restaurant industry expertise, CIT’s team quickly recognized the considerable potential of a relationship between Sentinel and Pizza Hut in Southern California. While near-term prospects appeared dim for some restaurant chains, CIT agreed with Sentinel that Pizza Hut was well positioned to maintain or grow its Southern California sales in spite of less-than-ideal economic conditions.
Pizza Hut’s excellent reputation for quality, value and customer service was a strong asset. The company also has a proven track record for boosting sales by introducing new products, such as an extremely popular new line of pasta dishes launched in 2008. CIT also was impressed by Sentinel’s success with its previous investments in Taco Bell and Church’s Fried Chicken businesses, and with the qualifications of the new company’s CEO, a Pizza Hut veteran with more than 20 years of industry experience.
For the transaction, CIT proposed a financing solution that included a term loan and revolving credit facility, designed to meet Sentinel’s specific needs.
- 结果
-
In August 2008, Sentinel announced the formation of Southern California Pizza Company and the acquisition of 123 Pizza Hut restaurants and the underlying real estate for many of the units. While full terms of the sale were not disclosed, CIT was joint lead arranger on a $29.3 million senior secured credit facility, consisting of both a term loan and revolving line of credit.
Despite challenging conditions in the credit markets, CIT was able to execute the transaction quickly and efficiently to meet the client’s requirements. The transaction represents a major milestone for the recently formed restaurant practice within CIT Corporate Finance.
Southern California Pizza sees excellent sales growth potential for its existing stores in Los Angeles, Riverside, San Bernardino and Orange County, one of the best markets for quick service restaurants in the country. The company also is looking at new store development opportunities in the region.
