Tampa fast-food chain has new owners in deal that cuts $225M of debt

A trio of investment partners has acquired majority ownership of Tampa-based Checkers Drive-in Restaurants, in a recapitalization deal that helps avoid further long-term debt issues. 

The company, in a June 20 statement, says the deal with its lenders reduces its “long-term funded debt from approximately $300 million to $75 million.” The company, with more than 800 locations under the Checkers and Rally’s brands, will also receive “additional $25 million in new debt financing commitments to fund store remodeling programs and other growth initiatives.”

Under the terms of the agreement, majority ownership of the company shifts to Checkers' senior lenders: Arbour Lane Capital Management LP; Garnett Station Partners; and Guggenheim Investments. The previous parent company, Oak Hill Partners, hired an adviser in January to explore refinancing options, according to Bloomberg News. Oak Hill acquired Checkers from Sentinel Capital Partners in 2017 for $525 million.

“This is a positive development for the company and our stakeholders," said Checkers Drive-In Restaurants Inc. President and CEO Frances Allen says in the statement. "The recapitalization provides us with the financial flexibility we need to better position ourselves to invest in and continue growing our business."

Checkers has been on a bit of an up and down cycle. Sales were off in 2019 and 2020. But the pandemic was a counterintuitive boom, when the company’s closed kitchens, double drive-thrus and dedicated e-commerce pick-up lanes resonated with customers. Oak Hill invested another $20 million into the business in 2021 to fuel more growth.

But more recently, inflation, labor shortages and food costs have all taken a bite out of revenue volume and margins. That led bond rating agency Standard & Poor to downgrade the company’s credit rating in late 2022, according to trade publication Restaurant Business. Sales at Checkers rose 1.6% to $618 million in 2022, while Rally’s sales grew 2.9% to $332 million, according to data from Restaurant Business sister company Technomic.

Allen, named CEO in February 2020, a month before the pandemic, says the restructuring will put the company on better footing. 

"It is important to underscore how optimistic I am about the future of this company," she says in the release. “Our strong financial performance throughout the pandemic, and through the first two quarters of 2023 while in the midst of inflationary pressures, gives me great confidence that our strategic five-year plan is working, and we can grow profitably and achieve long-term success. Our cash position is strong, our balance sheet no longer has the drag of legacy debt, and we have the full commitment of our investors."