Business

Yum Brands to acquire Habit Burger Grill’s parent company

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Yum Brands — the parent company of KFC, Taco Bell, and Pizza Hut — is set to acquire Habit Burger Grill’s parent company.

On Monday, Yum Brands announced it had entered into a definitive agreement to acquire The Habit Restaurants. The deal will make Habit Burger Grill the first fast-casual chain in Yum Brands’ fast-food-centric portfolio.

Habit Burger Grill regularly tops customers’ rankings of the best burger chains in the US. The California-based burger chain topped USA Today’s 2019 readers’ survey of the best regional fast food and is regularly ranked as one of America’s favorite restaurants by Consumer Reports.

The burger chain has expanded rapidly in recent years, growing from 172 restaurants in 2017 to 278 locations worldwide in 2019.

“As a fast-casual concept with strong unit economics, The Habit Burger Grill is a fantastic addition to the Yum! family and has significant untapped growth potential in the U.S. and internationally,” Yum Brands CEO David Gibbs said in a statement on Monday.

“With its delicious burgers and fresh proteins chargrilled over an open flame, The Habit Burger Grill offers consumers a diverse, California-style menu with premium ingredients at a QSR-like value,” Gibbs continued. “The transaction is a win-win because it allows us to offer an exciting new investment to our franchisees and to expand an award-winning, trend-forward brand through the power of Yum!’s unmatched scale and strengths in franchising, purchasing and brand-building.”

Analysts have recently been predicting that Yum Brands may be open to acquiring more chains. In mid-December, Wells Fargo analyst Jon Tower said in a note that Yum’s tone on mergers and acquisitions “appears to have shifted, in our view.”

“While the company is still looking for enablers for the system (i.e., QuikOrder, Collider) and business conversions (i.e., Telepizza and Rostiks ), YUM sounds more willing to consider adding to the portfolio over time,” Tower writes. “Throughout our conversations over the years, management often dismissed portfolio additions for any business that competed head-to-head with the global quick-service leader (MCD) or did not have an international presence.”

In December 2018, Gibbs told Business Insider that the “restaurant industry is becoming all about scale.” Gibbs, who was the company’s president and CFO at the time of the interview, was promoted to CEO in January 2020.

At the time of the 2018 interview, Gibbs told Business Insider that while brands were “constantly” presenting themselves to Yum in hopes of being acquired, often the “distraction” of a new brand was not worth Yum’s investment.

“It would have to be a brand … that fits in with our growth drivers, that could be a big developer, that has a distinctive, relevant brand, that could grow same-store sales growth in the long term,” Gibbs said in the interview.

“If a brand fits all of our criteria — a lot of which I can’t share for strategic reasons — then yes, we would go do an acquisition and be excited about it,” Gibbs continued. “And we’re always looking at them.”

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