Joining Sentinel Portfolio Companies
Southern California Pizza Company (“SoCal Pizza”) is the largest Pizza Hut franchisee in California and the third-largest in the United States. At the time of our exit, SoCal Pizza operated 221 Pizza Huts in greater Los Angeles.
Background
As part of a refranchising program to reduce the number of company-owned units, Pizza Hut, a subsidiary of Yum! Brands, decided to divest 123 units in the Los Angeles market. While store-level personnel continued at Pizza Hut after the sale, no executive-level management was provided. Pizza Hut required potential buyers to have proven QSR experience and an approved senior management team capable of overseeing one of the largest franchisees in its system.
Because a proven, pre-identified CEO was essential to being selected as the buyer, we set out to recruit an experienced executive to manage the business and optimize the units, which were not operating at their full potential.
Opportunity
- To acquire stable but underperforming QSR units of a prominent brand in a growing category
- To invest in a leading QSR in a tier-one market that could serve as a platform for acquisitions
Accomplishments
Located the Right Executive: Sentinel’s search led to a talented executive who previously had spent two decades in the QSR industry, primarily in the Pizza Hut system. Most recently, he was a regional president for another QSR concept and was responsible for more than 350 restaurants.
Built a Brand New Management and IT Infrastructure: Working with our new CEO, we recruited an entire senior executive team; hired a full support team to manage the finance, marketing, and human resources functions previously provided by Pizza Hut; implemented new IT infrastructure; and established standalone insurance, benefits, and other necessary programs. All of this was completed before closing, which made allowed a seamless transition in ownership for SoCal Pizza.
Optimized the Business and Acquired New Units to Build Scale: The new CEO brought new discipline and processes to SoCal Pizza, and within several months of closing had achieved significant and permanent cost improvements. With performance at the original units having improved significantly, we approached Pizza Hut about more units in Southern California, and in 2009 acquired another 98 units, almost doubling the size of the business.
Outcome
Under the leadership of its new CEO, SoCal Pizza’s growth accelerated and its free cash flow increased substantially. In 2012, having held the investment for more than four years and having achieved our investment objectives, Sentinel sold SoCal Pizza to another private equity firm in a management buyout transaction. Following Sentinel’s exit, the executive we recruited continued as SoCal Pizza’s CEO.
Case studies have been selected for illustrative purposes for management teams of midmarket companies considering a partnership with Sentinel and should not be considered an offer or solicitation of services or an actual or implied endorsement of Sentinel or any security, investment, or portfolio company. The portfolio companies highlighted are not representative of all current and prior investments of Sentinel. A list and description of investments since Sentinel’s inception is available on this website.