QK Holdings Case Study

Leading Brand Resurgence

Overview
  • QK founded as Denny’s franchisee by Robbie Qualls and Doug Koch in 1993 with their first restaurant in Holbrook, AZ
  • QK purchases 9 units in Oregon, Dennis Ekstrom joins company as senior executive in 1995
  • QK diversifies into CSR in 2002 with an acquisition of Del Taco units in New Mexico
  • QK expands into 9 states with 88 restaurants by 2011, becoming the largest Denny’s franchisee in the U.S. with nearly $100MM of revenue and the strongest operating team in the system
  • Robbie Qualls seeks to retire and cash out in 2013 while Doug Koch wants to continue to expand the business
  • They select Cave Creek Capital as a 50% partner in a $43MM leveraged recapitalization
  • Highly complex deal closed with 79 separate LLC’s and three different corporate entities combined in hybrid stock/asset transaction; met liquidity and tax needs of the three founders
  • Founders, Doug Koch and Dennis Ekstrom receive partial liquidity for their shares and continue as senior management while Robbie Qualls remains as Vice Chairman of the Board
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Results
  • QK restaurant base grows by 15 units and Denny’s brand surges under new corporate leadership, with run rate revenues growing nearly 30% within two years
  • Record comp store growth of nearly 10% for 2015
  • EBITDA grows almost 50% since the aquisition
  • Substantial progress in building infrastructure; CFO hired, first audit and consolidated tax return
  • Restaurant industry in general and Denny’s, in particular, continues strong resurgence in performance and valuations under CEO, Jon Miller