ARC Group, Inc. is adding another wings chain to its portfolio. The company announced October 14 it’s acquired 24-unit WingHouse Bar & Grill from Tampa-based Soaring Wings LLC for $18 million, comprised of $12 million cash paid at closing and $6 million in common stock.
To fund the deal, ARC borrowed $12.25 million from City National Bank of Florida.
Third Lake Capital, the majority owner of Soaring Wings, will also become a shareholder in the company, ARC said. It will receive three tranches of $1 million each in ARC common stock on the first-, second-, and third-year anniversaries of the closing date, at $1.40, $2, and $3 per share, respectively. “We believe the fact they are willing to accept shares significantly above the current trading price further validates the synergies of this transaction and their confidence in the long-term outlook for our business,” Seenu G. Kasturi, CEO of ARC, said in a statement
The multi-concept full-service operator owns 25-year-old Dick’s Wings & Grill, which has four corporate units, three concessions stands, 19 franchises, and sells 25,000 wings daily, the company said. ARC plans to operate the brands as separate concepts.
WingHouse debuted more than 25 years ago in Largo, Florida. It was created by NFL alum Crawford Ker. ARC said the brand generated more than $60.6 million in revenue and $3.5 million of cash flow from operating activities in 2018.
The chain bills itself as a spot that blends “the spirit and camaraderie of sports with the casual atmosphere of a full-service restaurant.” It has “WingHouse Girls” and wall-to-wall TVs, year-round sports coverage, and over-sized entrees, according to its website. Menu wise, the brand boasts 20 different sauces and rubs, like Korean BBQ and Dallas—a combination of brown sugar and honey barbecue. There are also options like grouper tacos and baby back ribs, appetizers, salads, burgers, sandwiches, and seafood. The company changes up its food and beverage offerings three times a year. WingHouse features a points-based rewards platform and online ordering as well.
ARC Group reported close to $8.8 million in total revenue during the first six months of 2019, according to securities filings.
“We are excited to add WingHouse Bar & Grill to our portfolio due to its established regional presence within a compelling segment, as we continue to aggressively expand our national footprint,” Kasturi added. “This acquisition is consistent with our strategy of acquiring restaurants chains for which we can leverage our franchising, marketing, operational, logistics and financial expertise to drive sales growth and profitability.”
He said the deal would provide ARC with scale as it projects combined annualized revenue north of $70 million.
ARC also runs four-unit Fat Patty’s, which it purchased for $12.3 million in August 2018—a deal that came soon after it announced a complex plan to buy Tilted Kilt.
That June, ARC said SDA Holdings, LLC, a company owned by ARC board member Fred W. Alexander, and the owners of Tilted Kilt fully executed all of the agreements for the sale. The plan included using funds loaned by Kasturi to satisfy payment obligations under the agreements to hold the franchise until ARC Group obtained suitable financing to acquire Tilted Kilt. Essentially, Alexander bought the brand and then sold it to ARC once financing was in place.
Fat Patty’s, founded in 2007 beside the campus of Marshall University, has stores in West Virginia and Kentucky.
ARC is led by former Hooters of America CEO Richard Akam, who also clocked time at Twin Peaks and First Watch.
"We are proud to partner with ARC Group, which has a strong track record of operational excellence and growth,” said Ken Jones, CEO of Third Lake Capital, in a statement. “We are pleased with what we have accomplished through our investment in WingHouse and are excited about what the future holds for this proven brand. We look forward to working with ARC Group to build upon the growth and success of WingHouse and, through our equity investment in ARC Group, share in the upside potential of this rapidly-growing company."