Franworks gets expansion cash
BENEV Capital acquires annual royalty interest
Fran Works Franchise Corp., the Calgary-based group behind three popular restaurant chains, secured a cash infusion Friday it said will help speed up its expansion plans.
Vancouver-based BENEV Capital Inc. completed a deal with FranWorks to acquire an approximate $12 million annual top-line royalty for a purchase price of about $103 million.
FranWorks owns and operates the Original Joe’s, State & Main and Elephant & Castle Pubs restaurant brands.
FranWorks’ expansion plans include opening 16 new locations over the next 18 months, along with extensive renovations to its nine Elephant & Castle locations.
The transaction provides a royalty structure similar to other Canadian chain restaurants, enabling FranWorks to access additional capital for growth as it gets compensated for adding new stores to the royalty pool every year.
“It gives us a bunch of cash to reduce our debt by almost 90 per cent. So we’ll have a small amount of debt,” said Derek Doke, chief executive of FranWorks, who owns the company as its controlling shareholder, although its trademark was sold to publicly traded BENEV.
“We’ll be able to then use additional capital from the transaction to continue to grow our business.”
FranWorks becomes the secondlargest shareholder of BENEV as part of the deal. Doke will join the board of BENEV.
Original Joe’s has 62 locations — 36 in Alberta, 17 in British Columbia, six in Saskatchewan and three in Manitoba. State & Main has 10 locations, including six in Alberta. Elephant & Castle comprises 14 locations, five in Canada and nine in the U.S.
Doke said the goal is to grow the number of locations to almost 200 within the next five years.
“The royalty acquisition from FranWorks is a platform transaction for BCI and the first step in our strategy to purchase top-line royalty streams from a number of growing multilocation businesses and franchisors,” said Sean Morrison, president and chief executive of BCI.
“FranWorks is a fast-growing chain with strong unit-level economics and a superb management team — key success factors for a top-line royalty acquisition.”