Kamal Singh has a message for sellers: “We’re willing to pay if it fits our long-term vision. Emerge is here.”
Singh is the CEO of Emerge Inc., a franchisee of Pizza Hut, Taco Bell, KFC and Sonic Drive-In that in late August acquired another 36 Pizza Hut restaurants to bring the group’s unit count across all four brands to 169. He and Chief Operating Officer Mick Rosckowff began building Emerge’s portfolio in 2016 after Singh acquired nine KFC/Taco Bells in Houston and Beaumont, Texas, to go along with the seven Louisiana units he bought the year before.
Using their own capital and working with lending partners, they’ve eschewed private equity, which Singh said gives them the freedom to look beyond the P&L and purchase packages of stores that may have somewhat messy books but are solid operations. “Second-generation owners, they may not have the best record keeping, but we know the business. We can look at the top line, the leases, the real estate,” he explained. “There’s no board we have to go to. We’re long-term buyers.”
Related: Inside Yum Franchisee Emerge Inc.’s Path to $200 Million
Of the most recent acquisition, 36 Pizza Huts in the San Antonio market, Singh said the deal included 23 pieces of real estate and Emerge paid “a competitive multiple.”
Kamal Singh, left, and Mick Rosckowff say they focus on developing relationships with sellers, which has helped them grow Emerge Inc. to 169 units across Pizza Hut, Taco Bell, KFC and Sonic.
“It’s an above-average unit volume market for Pizza Hut,” he continued. “We think there is an upside on the business.”
Mature franchised Pizza Hut restaurants, those open at least a year, had average sales of $1.03 million in 2022, according to the brand’s most recent franchise disclosure document.
The seller, Newton Associates I, is led by Clay Richmond, a second-generation franchisee whose father, Jack Richmond, bought a Pizza Hut restaurant in San Antonio in 1968 and expanded the brand throughout the area. Singh said he’d been speaking with the family regularly since 2018.
“I checked in with them every quarter to see when they’d be ready,” he said. “I made and established the relationship. I would meet them at conferences. This was not a heavily marketed opportunity; it’s a deal we built through relationships.
“Jack Richmond was an early franchisee in the system, so they wanted to keep the legacy alive in the San Antonio market.”
Unbridled Capital provided sell-side advisory services and Singh said this was Emerge’s third deal working with the investment banking company.
For Houston-based Emerge, the acquisition brings its Pizza Hut unit count to 84 and extends its presence in Texas with the addition of a sizeable collection of restaurants. The company in 2020 bought 48 Pizza Huts in Houston and throughout Arizona to enter the system.
“Geography is very important for us. We also own Taco Bells in San Antonio so we have operations there,” said Singh. “San Antonio is growing immensely,” and the group is working with Pizza Hut corporate to see if there are also opportunities for new stores.
Singh and Rosckowff went to every restaurant and met every general manager, said Rosckowff, something they do each time they acquire restaurants. Those trips serve to both introduce the restaurant teams to Emerge and help the new owners better understand the business from the people working in the stores every day. In learning from managers, they’re now adjusting delivery grids to service new areas, said Rosckowff.
“There’s lots of growth in San Antonio, but some of the grids hadn’t been updated in a decade,” he said.
This is Emerge’s second acquisition this year to bolster its portfolio within Yum Brands, the parent company of Pizza Hut, Taco Bell, KFC and The Habit Burger Grill. In March, Emerge bought nine Taco Bells in New Mexico to give it 23 in that brand.