Sentinel Capital Sells Franchisor Huddle House

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A private equity firm that invests in lower mid-market companies, Sentinel Capital Partners, announced yesterday that it has sold franchisor Huddle House Inc. for an undisclosed amount. The buyer was not disclosed.

In the last year Sentinel divested itself of hamburger franchisor Checkers/Rally’s, while it acquired seafood restaurant franchisor Captain D’s. Atlanta-based Huddle House was acquired by the New York City-based private equity firm in 2012.

Jim Coady, a partner at Sentinel, positioned the buy and sale of the chain as a nice turnaround and win for Huddle House’s franchisees. “Throughout our ownership, Huddle House has achieved impressive, system-wide operational results that have increased efficiency and improved productivity at the individual restaurant level. Average unit volume increased by 14 percent on our watch, which reflects the commitment and dedication to excellence of the entire Huddle House team.”

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But Huddle House, with its declared 30 company-owned and 328 franchises at the end of 2016, occupies a space in the troubled casual dining sector, which has been hard hit with traffic losses. As guests have left casual dining, the chain has also lost outlets over the years (see chart).  Sentinel stated in its press release of February 1, 2018, that Huddle House Inc. now oversees just 349 casual dining restaurants.

In 2016 the franchisor declared in its disclosure document provided to potential franchise buyers that restaurant-level EBITDA margin (Earnings before Interest, Taxes, Depreciation and Amortization ÷ Revenue) for its franchised restaurants was 7.3 percent for its middle 60 percent of franchised restaurants that had not yet remodeled to a newer design and 10.6 percent for its middle 60 percent of those that had.

“Sentinel has been a great partner to Huddle House and over the past six years, has helped us set and achieve meaningful strategic milestones,” said Michael Abt, CEO of Huddle House. “Our customers, franchisees, operators, and employees are super excited about Huddle House’s future."

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