Helping Entrepreneurs Realize their Dream

Recognizing opportunity in a fundamentally strong sector that was out of favor with investors, Sentinel initiated a search for an investment in the QSR industry in early 1996. This search led to Sentinel’s introduction to a Minnesota entrepreneur and 16-year veteran Taco Bell franchisee who, at the time, operated 10 Taco Bell restaurants in Minnesota. Taco Bell had offered him the opportunity to purchase its 65 company-owned Taco Bells in Minnesota. However, the entrepreneur lacked the resources and transaction experience to put the deal together. After carefully considering several private equity firms, the entrepreneur chose Sentinel as his equity partner. With Sentinel, he saw an opportunity to establish significant ownership and create substantial wealth.

Sentinel purchased a majority interest in Border Foods and became the first U.S. private equity firm to secure from Taco Bell and its then corporate parent Pepsico exclusive statewide development rights for the Taco Bell brand. To complete the transaction, the entrepreneur contributed his interest in his 10 Taco Bell restaurants.

• To partner with a proven QSR operator who had a long record of success.
• To use Border Foods’ valuable statewide development rights to build new units and increase density in Minnesota.
• To complement an experienced small business entrepreneur with additional management talent and build the necessary infrastructure to support future growth.

Supplemented Management in Preparation for Growth: Following the closing, Sentinel recruited a retired, highly successful restaurant executive with a proven record in another large-scale QSR system to help the entrepreneur manage the transition from a 10-store to 75-store operation. Sentinel also played an instrumental role recruiting a Taco Bell finance executive as Border Foods’ new CFO and a Taco Bell franchise manager as its new chief development officer. By the end of the first year, Border Foods had installed the systems and management infrastructure necessary to operate more than 100 units.

Opened New Units and Completed Acquisitions: During Sentinel’s ownership, Border Foods opened 12 new units and completed two add-on acquisitions—one in the company’s core Taco Bell business and one in its sister KFC system.

Border Foods’ EBITDA almost doubled in the first three years under Sentinel’s ownership. Having achieved its investment objectives, in late 1999, Sentinel sold Border Foods in a recapitalization transaction to the entrepreneur and his management team, who accomplished their goals of becoming majority owners and creating significant personal wealth. Since then, Border Foods has continued to grow and add new units under the leadership of its founding entrepreneur.