How Neal Aronson built Roark Capital into a booming business by buying up dying nostalgia brands like Jamba Juice and Arby's
- Neal Aronson founded Roark Capital in 2001 after working in the hotel business.
- Roark has acquired 90 brands that have 63,000 locations and account for $54 billion in system revenues
- Roark is best known for its fast-food empire and brands such as Jamba, Arby’s, and Dunkin’.
- Visit the Business section of Insider for more stories.
On a winter night in Dallas in 2018, Dave Pace, the chief executive of Jamba Juice, met with Steve DeSutter, the leader of Focus Brands, for a steak dinner. DeSutter ran the emerging multi-unit fast-food company whose mall-based brands included Auntie Anne’s and Cinnabon.
At the behest of Focus’ parent, Roark Capital Group, and its founder, Neal Aronson, DeSutter was on a mission: to begin a courtship that would eventually lead to the private-equity firm buying Jamba Juice for $200 million.
The smoothie chain had other suitors, but this meeting with DeSutter felt different, Pace said. While Roark was keen on buying Jamba, DeSutter kept that “first date” dinner conversation light, only loosely talking about a union.
Money was not discussed. It’s not the Roark way.
“It was a soft touch,” Pace told Insider. “It was a relationship.”
Seven months later, Focus Brands acquired Jamba. Even though Aronson never spoke directly with Pace, he said it was clear that the Roark founder was driving the pursuit.
“Everybody on their side said, ‘Look, this is Neal’s deal. Even though Neal wasn’t involved. It was ‘Neal wants to do this,'” Pace said.
Buying Jamba meant bringing a maverick brand to Roark, which was amassing investments centered on companies that stand alone with few competitors.
“They viewed Jamba as the kind of power brand that could lift the Focus portfolio a little bit further,” Pace said.
Roark has been snapping up high-quality brands and diamonds in the rough since it was founded nearly two decades ago.
In late December, Roark acquired its biggest crown jewel to date: Dunkin’ Brands Group Inc., the parent of coffee giant Dunkin’ and Baskin-Robbins. Dunkin’ sits under Roark’s other restaurant portfolio company, Inspire Brands.
With the purchase of Dunkin’, Roark’s investments have grown to include franchise model brands that provide consumers everything from roast-beef sandwiches to facials to doughnuts and coffee. To name a few: Arby’s, Sonic Drive-in, Buffalo Wild Wings, Orangetheory Fitness, and Massage Envy.
“They’ve acquired some concepts that have some hard-to-replicate features,” said analyst Mark Kalinowski of Kalinowski Equity Research, which covers the restaurant industry.
In many cases, Roark acquires brands with loyal fans in need of a turnaround or brands that seem past their prime. When Roark purchased Arby’s in 2011, the chain was losing millions. Now, Arby’s is one of the most successful restaurant chains. Buffalo Wild Wings, which Roark acquired in 2017, has a similar turnaround story. Under Roark’s ownership, Jamba Juice has changed its name Jamba, added bowls to the menu, and revealed a more modern look.
Independence and integrity
“It was a space that rewarded free thinking and free-for-all conversations,” a former Roark analyst told Insider.
The company was attractive to young analysts partly because it seemed to operate differently from other private-equity firms, three former analysts Insider spoke with said.
These analysts, who spoke on condition of anonymity so that they could speak candidly, said that Roark had a reputation for being open to hiring people fresh out of college or who came from unconventional backgrounds, rather than the typical investment-banking candidate.
Even Roark’s location is a mark of distinction.
Roark has 90 employees and is headquartered in Atlanta, a fact that one former analyst said the firm appeared to be proud of, in that it set it apart from competing firms in New York. Roark does have a regional office in New York City, though.
The company is named after Howard Roark, the protagonist in Ayn Rand’s book “The Fountainhead.”
“Integrity, as demonstrated by Howard Roark, is a commitment to one’s own thinking, philosophy, and viewpoint in the face of all opposition. Howard Roark’s life exemplified the qualities of independence and integrity,” the company’s website reads in a section titled “The Meaning of Roark.”
“Our investment style and business philosophy is meant to emulate those principles of independence and integrity.”
All three former analysts said there was a sense that Aronson knew each analyst by name and made a point of engaging them in conversations about what they were working on.
“He’s not the kind of person who’s going to go play golf” during the workday, a former analyst who worked at Roark from 2018 to 2020 said, adding that before the pandemic led most of the firm to work remotely, Aronson often kept his office door open so that people could come in and discuss ideas with him.
Aronson cut his teeth in the hotel business, founding US Franchise Systems with his uncle in 1995. They grew the company to be one of the largest hotel franchisors in the US, with 1,100 properties, and sold it to Hyatt Hotels for $100 million in 2000.
A year later, in 2001, Aronson founded Roark with the goal of buying out franchises and positioning them for growth. In the years since, Roark has acquired 90 brands that have 63,000 locations and account for $54 billion in system revenues, according to the company website. In February, Roark announced a new fund, Roark Capital Partners VI LP, with intentions of raising $5 billion.
Today, Roark’s portfolio companies run the gamut from health and beauty to home and commercial cleaning chains and, of course, restaurants.
Under Roark’s health and wellness umbrella, its brands such as DryBar and Orangetheory, can be found at strip malls and anchoring apartment buildings across the US. Roark’s Selt Esteem portfolio includes the Anytime Fitness gyms and the boutique fitness chain The Bar Method. Roark’s Driven Brands division comprises well-known car-repair chains like Maaco and Meineke, as well as niche brands like 1-800 Radiator.
But Roark is best known for its restaurants.
It has made significant investments in the Cheesecake Factory, including a $200 million dollar investment last year. At the time of that investment, Roark added a seat on the restaurant brand’s board and installed Paul Ginsberg, president of Roark. The Cheesecake Factory has in turn purchased North Italia and Fox Restaurant Concepts, which includes growing local chains like Flower Child.
The crown jewel for Roark, though, is its franchised fast-food chains, ubiquitous in malls and city centers and off of every highway in America. Most of Roark’s fast-food chains sit under two portfolio companies — Inspire Brands and Focus Brands. Under Inspire are acquisitions like Arby’s, Jimmy John’s, and Buffalo Wild Wings as well as the newly acquired Dunkin’. Focus boasts Jamba, as well as Cinnabon and Moe’s Southwest Grill.
Roark’s portfolio companies
Roark’s portfolio companies include health and beauty, pet retail, car repair, and restaurant brands. Click tabs to see each category’s brands.
One former analyst said that Aronson often talked about what he learned from his experience franchising hotels.
He told Roark employees “about identifying trends of consolidation in the hotel industry, in the ’90s, and really seeing how that would benefit the consumer, how it would be better for employees, how it would make labor more efficient.”
“He really saw that as a win-win. With Inspire Brands, the goal is to do the same, but for restaurants,” the former analyst said. “Neal thought that there could be real improvements with consolidation.”
Roark’s area of focus has long been multi-unit franchises. When Roark makes a deal, it analyzes large chunks of consumer-spending data to implement solutions that can make its portfolio companies more efficient.
When it is considering acquiring a company, its analysts consider whether it would help the firm obtain what Aronson “terms ‘best in class’ value, or ‘best in class’ technology” that can help Roark’s entire portfolio grow, a former analyst said.
Playing the long game, or just another private-equity firm?
People who have worked with Aronson said that part of his success stems from the fact that when he started Roark, few in the private-equity industry had invested in franchisors.
Like Howard Roark, Aronson wasn’t afraid to go against the grain and play the long game.
“He is my all-time favorite character in any book,” Aronson told QSR in 2014. “He has conviction, passion, unbelievable honesty, openness, and he’s loyal and trustworthy. He refuses to follow fads, trends, or popularity. He follows what he believes.”
Through Roark, Aronson declined to be interviewed for this story.
Although Aronson had just spent the past five years growing a chain of 27 regional hotels, he took to restaurants quickly. Right out of the gate, in 2001, Roark purchased Carvel, the ice-cream brand, and then, in 2004, its Focus Brands division bought Cinnabon and Seattle’s Best Coffee International for $21 million from AFC Enterprises.
From there, the deals kept getting bigger.
“It may be that there became a comfort level” with larger deals, one person involved in the buildout said.
Unlike other private-equity firms that look to turn around businesses over two to five years, Roark has held its investments for longer periods. Today, the Carvel brand continues to rest under Focus Brands.
Because of this, some said Roark developed a reputation as a private-equity investor who isn’t as focused on eking out short-term profit as much as investing in people and resources that might take time to assemble but ultimately pay off.
Others under the Roark umbrella can’t see a difference between Roark and many other private-equity firms.
Insider spoke with two current and one former franchisees of Maaco, the leading collision and automotive-repair service in Roark’s Driven Brands portfolio of about 10 companies.
All three owners had been with Maaco since the days of the company’s founder, Anthony Martino, whose unexpected death in 2008 led to the company’s series of acquisitions by private-equity firms — the latest of which being Roark.
From their perspective, Roark was only nominally different from Driven Brand’s previous private-equity owners, each of which was a far cry from the familial relationship and detailed auto-service business acumen of Maaco’s corporate offices under Martino.
David Wilson, who opened the sixth Maaco franchise location and went on to own several others across Nebraska and Iowa, allowed his final contract to expire shortly after Roark’s takeover.
“Maaco was extremely good to me for a long period of time, and then they lost their way,” he said.
Both current owners Insider spoke with were highly successful franchisees, but neither could point to any interactions with Aronson himself, nor anyone at Roark beyond Driven Brands CEO Jonathan Fitzpatrick.
Each compared Roark’s management favorably against Driven Brands’ prior owner, Harvest Partners, though both expressed unease at what they viewed as a corporate strategy of growth by acquisition at the expense of increasing the performance of the existing business.
Small details and big deals
With Roark’s restaurant deals, the company seems to have a more nuanced approach.
Similar to the Jamba deal, Roark researched every aspect of the 65-unit Miller’s Ale House concept before purchasing the casual-dining chain in July 2013.
The company tapped the restaurant consultant Tim Powell in April of the same year to conduct a “soft” analysis of the Florida casual sports bar and restaurant, known for its vast menu and rotating beer selections.
Unlike other private-equity companies, Powell said Roark is not just interested in the hard numbers when buying a brand. While the “books” are important, Roark spends extra time — and money — scouting the intangibles of a restaurant.
In the case of Miller’s Ale House, Powell visited restaurants to see how managers and servers interacted with guests. He analyzed how competitive the brand was, from the “craveability” of the menu to the quality of the real estate.
Powell also held focus groups to give Roark feedback on how diners received and responded to the brand. No detail was too small.
Roark wanted to know which foods customers liked. Was there something missing from the menu? Did they like the service? How long did it take for the food to arrive? Did they like the “wood paneling” and “cabin feel” of the decor?
Roark takes this holistic approach to determine if the restaurant chain meets the company’s stress test: Is this a brand that diners love and that franchisees will want to grow?
“This is what makes them different,” Powell said. “This is a part of their strategy.”
Pace said the same vetting occurred when they looked at Jamba.
“They’re very thorough and they’re very fast,” he said. “Their approach was to get ahead of everybody else.”
Powell said he never did business with Aronson, but he referred to him as “an innovator ” who seeks to learn more about the brands he owns.
“He is intelligent in numbers, but also seeks to learn the soft side of patron behavior and, dare I say, philosophical perspectives that don’t necessarily have a simple EPS or P/E ratio,” Powell said, referring to earnings per share and price-to-earnings ratio.
“After all, he did name his company after the innovator and shaper Howard Roark from Ayn Rand’s book,” Powell added.
Scale through franchising is important to Roark. And no one understands the importance of scale more than Greg Flynn.
Flynn is the CEO and founder of Flynn Restaurant Group, the largest multi-unit franchise company in the US. Flynn’s San Francisco company recently closed a deal to nearly double his restaurant empire to about 2,400 restaurants by adding Pizza Hut and Wendy’s to his portfolio of other brands — Arby’s, Applebee’s, Panera Bread, and Taco Bell.
Flynn said Aronson is executing his original vision for Roark brilliantly.
“He believes deeply in the power of brand — he believes deeply in the franchise model,” said Flynn, who bought 368 Arby’s, an Inspire Brands chain, more than two years ago.
Flynn said he and Aronson connected when they first met because they shared a common belief that it was important to let teams lead independently while providing them central support, including superior technology.
“That’s what Inspire is,” Flynn said. “I’ve never seen anyone form an idea and pursue it so relentlessly and effectively as I think I’ve seen Neal pursue his idea.”
On the acquisition side, once the courtship is over, Roark tends to skip the honeymoon when the deal is sealed.
Pace felt this firsthand. Roark had Pace start the handover process of Jamba in the weeks before the purchase was completed.
By the time the deal closed, on September 13, the transfer of power was done. Pace was no longer needed. He was out the door on the same day, he said. He walked away with his head held high because it was a great win for Jamba shareholders, and for Aronson, who got what he wanted. Pace said there was no animosity.
“They don’t waste time on warm and fuzzies when the deals are done,” he said.
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