Bob Evans restaurants was sold in a deal valued at $565 million, which will split the restaurant division from the brand’s fast growing packaged foods business.
Golden Gate Capital, which owns California Pizza Kitchen and Red Lobster, purchased the 523-unit brand and will put it on a path to accelerated growth, says Bob Evans president John Fisher.
“With an acquisition this size, there are always changes, but our operational structure is the same [and] our leadership is the same,” Fisher says. “Bob Evans is on the track to contemporize the menu, improve guest service and hospitality, and improve the way we market the brand and we started that track about 18 months ago. We’ve seen results and Golden Gate is going to help us get better at all three of these things.”
Investors have praised the move, sending company shares up more than 20 percent upon news of the deal. Bob Evans also acquired Pineland Farms Potato Company for $115 million to further its commitment to increasing packaged foods capacity.
“Investors see that the Bob Evans foods business is a very fast growing expansion business in the grocery and retail segment,” Fisher says. “With the foods business solely focused on the retail side they’ll continue to grow at that rate with all the public investment money. The restaurant business is more mature and has a different growth pattern. Now that we’re privately held by one investor who understands the growth patterns in restaurants, there’s better alignment in what the investors’ expectations are for both companies.”
In 2016, Bob Evans restaurants experienced 2.5 percent decline in same-store sales and 41 restaurants closed, while the foods segment reported sales growth of 2.2 percent.
“Our first growth objective is to improve unit economics in our existing footprint,” Fisher says. “In the right real estate locations, we’ll open new restaurants where it makes sense.”
The acquisition of Pineland Farms also adds a potato processing facility with 180 million pounds of capacity to the Bob Evans’ portfolio, along with a 900-acre potato farm. Bob Evans estimates that its side-dish product mix for retail and foodservice will comprise about two-thirds of its sales volume by 2020.
“The sale of Bob Evans Restaurants enables us to concentrate exclusively on BEF Foods, our fastest growing and most profitable segment,” Bob Evans Foods president and CEO Saed Mohseni says in a statement. “We believe this focus will result in higher returns for our shareholders and, as a more focused private business, Bob Evans Restaurants will be better able to deliver on its brand promise of providing quality food and hospitality to every guest at every meal.”