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ATLANTA - Private-equity firm Roark Capital announced that its company Focus Brands, a buyer of franchise chains, is acquiring Auntie Anne's Inc., the franchising firm of the soft pretzel chain. The two parties have entered into a "definitive agreement" for an undisclosed amount. The deal is anticipated to conclude later in the fall.
With this acquisition Focus Brands has gone from more than 2,200 franchisees in its other eatery chains to 3,300. Pennsylvania-based Auntie Anne's has nearly 1,100 franchised stores in 44 states and 21 countries. With the addition of Auntie Anne's, Focus Brands will be drawing royalties from six franchise brands generating more than $1.4 billion in annual systemwide sales. It oversees such domestic brands as Carvel, Cinnabon, Schlotzsky's and Moe's Southwest Grill.
When franchising firms are bought, store owners can find themselves dealing with not only new officers of the franchising firm, but also significantly different strategy and support of the chain. Auntie Anne's does not have a trade association that acts as an independent voice, protecting the interests of its franchise owner-operators. However, the franchisor does require owner-operators to pay a regional advisory council fee to support a body that provides advice to Auntie Anne's Inc. on how to improve. None of the Focus Brands chains have an independent trade association. Neither do they have a franchisee cooperative: the store owner alliances that are responsible for operational functions in a chain, such as national advertising, marketing, distribution, purchasing and supply chain management.
While the company has been weak in delegating systemwide authority to franchisees, it has endeavored to nurture a collaborative culture with strong franchisee relationships.
This is Roark Capital's 19th franchise chain acquisition, investing in franchise chains as diverse as BatteriesPlus, FastSigns and McAlister's Deli. It has gobbled up seven other restaurant chains.
Neal Aronson, Managing Partner of Roark Capital, is upbeat about the buyout. "Auntie Anne's is a wonderful company with a great history. We are pleased to bring together these two highly respected franchise organizations," he says.
David Hood, president of iFranchise Group, a builder of start-up franchise systems, thinks that the acquisition should not come as a big shock to Auntie Anne's franchisees. "For the franchisees that have been at Auntie Anne's for a long time, they probably knew that when the business was sold by the founder five years ago that the business would be sold again." Hood worked as a vice president of franchise development at Auntie Anne's and eventually became its president before working with iFranchise Group.
Hood thinks that managing Auntie Anne's strong relations with its franchisees will be a challenge for the conglomerate. "Of the brands Roark has in place, Auntie Anne's is by far the strongest as far as the quality of franchisee relationships," says Hood. The franchise consultant points out that to his knowledge there has been no litigation in the Auntie Anne's system for the past 10 or 15 years. "I don't think you can say that about any of the other brands Roark has," says Hood. "For Roark to maintain that will be a challenge — not because they have bad intentions but because it is a different type of organization looking at the brand."
Russ Umphenour, CEO of Focus Brands, indicates that he understands that an important asset of Auntie Anne's is its special relationship with its franchisees. "This world-renowned brand has been recognized repeatedly for offering a solid and rewarding business model for both their franchisees and their guests," the head of the acquiring company emphasizes.
Hood declares, "I'm confident that Auntie Anne's current management communicated during the process of selling to Roark the importance of maintaining strong relationships with its franchisees and what that has done to make the system a success."
Auntie Anne's president and chief operating officer Bill Dunn declares, "Auntie Anne's prides itself on offering high-quality products, efficient operations and people-focused philosophies. Focus Brands' mission and vision complements Auntie Anne's 22-year-old founding principles, and we look forward to working together to grow our brand and continue offering the fresh pretzel products and signature beverages that our guests have come to know and love."
"Hopefully, Roark won't do anything to mess it up," says franchisor consultant Hood.