With economic headwinds creating a tumultuous M&A landscape, multi-brand franchisee Chris Scanlan was already staring down a complex dealmaking process when he chose to sell his 51 restaurants.

Add in that his 30 Jack in the Box and 26 Jamba locations were in Hawaii and Guam, and the process seemed even more tricky. With the unique geography came challenges such as supply chain logistics, strict regulations and limited lenders.

To assist with the complicated process, Scanlan turned to investment bank Trinity Capital (now Citizens M&A Advisory), which shifted the strategy from finding a single buyer to seeking one for each brand. PARS Group bought the 28 Jack in the Box locations in Hawaii and two in Guam in October 2022, while Fresh Dining Concepts purchased the Jamba stores in December 2022.

Based in Seattle, PARS is an existing Jack in the Box franchisee, while Miami-based Fresh Dining Concepts owns several brands under GoTo Foods, the parent company of Jamba, Auntie Anne’s and Cinnabon.

“They would be able to find more value by not being distracted with a brand they didn’t have a sense of or knowledge for,” said David Stiles, Trinity managing director. “We thought it was better to let these brands fall into the hands of those who know them best.”

Because both businesses use the same back-office administration, an early measure in the negotiations was having an administration management services contract between the two buyers. Stiles said this arrangement, and the purchasing parties being agreeable, made the process smoother.

Chris Scanlan Franchise Times

“Sometimes you can get a counterparty that can be much more objectionable in terms of what they’re trying to accomplish,” Stiles said. “In this case, both parties were very positive and proactively solution-oriented in trying to make the deals happen.”

The ensuing work involved tackling challenges associated with island-based franchising. For example, both buyers had to negotiate their own respective supply chains for getting product to Hawaii and Guam from the mainland.

The parties had to navigate Hawaii’s Dislocated Workers’ Act, which requires an additional 60 days of notice to employees before a closure. As part of the eventual deals, an agreement was made where Scanlan’s ownership companies retained employees and charged the buyers for their services until the notification period ended, and the workers could be re-hired.

After negotiations pushed through most of 2022, the economic environment threw an 11th hour curve ball in the mix, threatening the Jack in the Box deal as PARS had to replace a lender that backed out.

“With economic factors, you can imagine how traditional lenders were feeling about things,” said Paul Urbina, a partner at PARS. “I was kind of limited with the number of larger lenders who had the ability to even do this deal. They dropped off month by month.”

“We had to scramble to figure out how to get a replacement partner in there,” Stiles said. “I was able to get MidCap Financial to step up. I think it was Paul, though, who really mined that new relationship and got it to be in place to be comfortable to finance it quick.”

Kevin Bush, chief strategy officer at Fresh Dining Concepts, said overcoming these obstacles is only possible when there is cooperation between all parties.

“Deals are complicated, messy and inevitably, things come up,” Bush said. “There are nuances and it takes people on both sides of the table to have a willingness to figure things out in a fair way, and we did that. It’s why we got the deals done.”

While the sale prices were not disclosed, Stiles said an attractive valuation was achieved for the seller because of Scanlan’s dedicated work over 16 years with Jack in the Box and nine with Jamba on the islands.

“When something like that is offered, it’s a trophy asset,” Stiles said. “Operating in Hawaii is an absolute unique situation, but these locations were really the best performing stores in the system.”

The discussions were also made easier on the Jack in the Box side because of how familiar the PARS team was with Scanlan.

“It was more of a collaboration than a negotiation,” Urbina said. “Right when we were doing this, inflation was at a 40-year high, but Chris was great to work with through the negotiating. We were communicating nearly daily.”

Both buyers stressed the importance of carrying on what Scanlan built.

“Hawaii is an incredibly unique and awesome market,” Bush said. “It’s a great place to do business. It’s the United States, but it has its own fully unique culture. It was very important to us that we maintained that culture and we didn’t come in and say ‘you must do things our way.’ We had to enter and say, ‘we need to adapt and understand how you run these stores.’”

Franchise Times