Helping Entrepreneurs Realize their Dream

Falcon was owned by a specialty finance company that securitized and sold QSR loans to institutional investors. The specialty finance company had provided debt financing to Falcon’s former owners but ultimately foreclosed on the loan after Falcon’s performance deteriorated. Under its ownership, the finance company engaged a turnaround consultant who staunched the cash flow losses and stabilized the business. With Falcon operating at breakeven, the finance company—whose primary business was debt financing for restaurants, not owning them—decided to sell the business. As an ongoing lender, the finance company sought a trustworthy buyer like Sentinel with a proven QSR record.

To position itself as the next owner, Sentinel needed to replace the turnaround consultant with a permanent CEO. To do this, Sentinel recruited Aslam Khan, then COO of another Church’s Chicken franchisee, as Falcon’s CEO. At that time, Mr. Khan did not own equity in his company and was seeking an opportunity to create personal wealth. He had an impressive 11-year record in the Church’s Chicken system and had led the turnaround of the 48-unit franchisee after it was purchased out of bankruptcy by a private investor.

• To back a proven operator who could return the units to their previous profitability and, thereafter, to open more Church’s Chicken restaurants in existing markets
• To partner with an ambitious executive who had not yet established personal wealth but who owned a significant stake in Falcon and was highly motivated to create equity value

Executed Turnaround: Following the closing, Falcon relocated its headquarters to Chicago, close to most of its restaurants. Under its new CEO, Falcon recruited a new senior management team, replaced most of its store managers, and upgraded its financial and systems capabilities. Food and labor costs were quickly brought into line, and the customer experience improved dramatically.

Stabilized and Grew Business: Within months of the closing, comparable restaurant sales growth reached double-digit rates and profitability climbed rapidly. With the business stabilized, Falcon began a capital investment program of reimaging existing restaurants and building new restaurants.

After holding the investment for more than five years and having accomplished its investment objectives, Sentinel sold Falcon to its CEO and management team in a recapitalization transaction. Under the management team Sentinel helped build, Falcon has continued to grow and today operates more than 175 restaurants.