Bojangles’ could be gobbled up by another restaurant group, report predicts

Bojangles’ could be gobbled up by another restaurant group, according to an analyst report this week.

In its research note, investment group CL King wrote that the Charlotte chicken-and-biscuits chain could be an acquisition target – “given its recent underperformance” – for Inspire Brands, the restaurant group that Arby’s formed when it acquired Buffalo Wild Wings this month.

The Atlanta private equity firm Roark is the majority owner of Inspire Brands. According to CL King, Roark tried unsuccessfully to acquire Popeyes, another friend chicken chain, in early 2017. CL King says Inspire is looking to grow its portfolio of restaurants via mergers and acquisitions. Bojangles’ valuation is “attractive and is certainly a bargain by QSR (quick service restaurant) chain standards.”

“(Bojangles’) would check all the boxes regarding what Roark has historically looked for in an acquisition target, i.e., iconic brands that have stood the test of time and that have underperformed peer metrics and have room to be improved,” CL King wrote in its report.

Representatives from Bojangles’ and Inspire Brands could not be reached for comment.

Inspire plans to acquire up to 10 small to medium-sized restaurant chains of all varieties, CL King noted.

“We believe the time is right to create a different kind of restaurant company – one with a broad portfolio of distinct brands across a full spectrum of restaurant occasions,” Inspire Brands CEO Paul Brown said in a Feb. 5 press release announcing the debut of the restaurant group.

Nearly three years after going public, Bojangles’ has sputtered, despite the early excitement about the iconic brand’s initial public offering.

The company’s share prices plummeted nearly 37 percent last year, and it closed up 1.7 percent to $12.10 Wednesday. Same-store sales, a key metric that gauges a retailer’s health, fell 2.2 percent in the third quarter. The company’s net income plummeted nearly 30 percent over the same three-month period.

Bojangles’ has been hurt by the deep discounting done by some of its competitors, experts say.

But there are ways that Inspire could improve Bojangles’, whose problems are “largely self-inflicted,” CL King said. For one, Bojangles’ is “woefully behind peers” in its implementation of technology and its rollout of a company-wide check-out system, mobile ordering and delivery. Inspire could also help Bojangles’ figure out a “better value platform” – such as the launch of Sliders sandwiches at Arby’s to better compete with $5 foot-long sandwiches at Subway.

Bojangles’ could also benefit from re-franchising its company-owned stores, CL King said (that’s something the company has already said it is looking at because it sees franchisees as less risky.)

This wouldn’t be the first ownership change for Bojangles’, which was started in Charlotte in 1977.

Advent International bought a controlling stake in the company in 2011 from Falfurrias Capital Partners, the Charlotte private-equity firm co-founded by former Bank of America CEO Hugh McColl Jr. and Mark Oken, a former Bank of America chief financial officer. Advent holds a 70.5 percent stake in the company, CL King notes.

This story was originally published February 14, 2018 at 4:06 PM with the headline "Bojangles’ could be gobbled up by another restaurant group, report predicts."