Perales Adds To His Restaurant Collection
Guillermo Perales seems to be collecting restaurant brands like other people collect stamps or bubble gum cards. The CEO of Sun Holdings bought stores with another concept this month: Krispy Kreme, making it the latest in a series of deals that has vaulted Sun into one of the 10 largest restaurant franchisees in the country.
In this deal, Sun bought three Krispy Kreme locations in the Dallas market, where Sun is based. He also agreed to develop another 15 locations over the next five years. The addition gives Sun seven different restaurant brands in the Dallas and Orlando markets.
“It’s a win-win,” Perales said. “Krispy Kreme is in North Carolina, and they have three stores here in the middle of nowhere. We are here. We do a lot of local marketing. It’s easy for us to do a better job here. We’re going to give them 15 new stores. We’re going to own the market and control the market.”
A handful of operators have taken advantage of refranchising to get much larger, but few have done so as much as Perales, who has made three deals in the past 14 months—including the 99-unit Burger King purchase and the 50-unit Arby’s acquisition last year. In both those cases, Perales has taken on concepts that are on the upswing, in theory buying low in the hopes of catching the waves as they grow.
Krispy Kreme fits that mold. The North Carolina-based doughnut shop was a mess but is currently on a major comeback. Its sales are improving, and its stock has flourished—you’d have nearly $12,000 today if you had invested $1,000 in the company’s stock on January 1, 2009. Perales said the company has fixed its biggest franchising problem: a costly prototype that cost millions to build and required wholesale doughnut sales to survive.
“They had these monster stores,” Perales said. “These had these monster stores, and you depended on wholesale.” The new stores use smaller doughnut making machines and enable a location to get by with retail sales alone. To Perales, it makes the unit economics work better.
“Here, we’ll keep it afloat,” he said. “We just need to sell $1 million plus per store. The new production machine is easier to manage.”
But Perales also indicated that he’s shifting his brands. Perales said he’s selling two of his concepts, including Del Taco and Golden Corral. He indicated that he’d be interested in buying other brands in the process, so long as they work well in the Dallas or Orlando markets where he operates.