Do Dunkin’ and Arby’s Go Together? Private Equity Group Bets $11 Billion They Do

The takeover by Inspire is the second time that Dunkin’ will be owned by private equity. In recent years, the private equity owners of consumer brands like Neiman Marcus, Payless ShoeSource and Toys “R” Us have been criticized for those leveraged buyouts, which left behind debt that limited the brands’ ability to respond to new needs before they succumbed to bankruptcy.

Inspire’s primary backer, Roark Capital, isn’t the stereotypical private equity firm. Roark, which is named for the protagonist in “The Fountainhead,” by Ayn Rand, is known for investing in its companies’ digital abilities, managing them at arm’s length and holding investments for longer than the typical three to five years for private equity firms. In some cases, it has held on to companies for more than a decade.

Roark was founded in 2001 with a focus on franchised businesses. It bought Arby’s in 2011, turned the ailing business around and merged it with Buffalo Wild Wings in 2018 to form Inspire Brands, which is controlled by Roark but also raises its own funds from other investors. It acquired Sonic in 2018 and Jimmy John’s in 2019.

What it was missing, until now, was coffee.

With Dunkin’, Inspire is squaring off more directly against Starbucks and JAB Capital, the European private equity firm that owns Panera, Peet’s, Krispy Kreme and others. The digital investments that bolstered Inspire’s other portfolio companies could help Dunkin’ compete where it is already strong in the Northeast. But to grow to more than 17,000 locations, as Dunkin’ has cited as a long-term goal, it may need to go where it has not gone before, at least in earnest — west of the Mississippi, into Starbucks territory.

“The ability to expand on the West Coast is essential,” said Peter Saleh, an analyst at BTIG, a brokerage firm. He warned in a research note in October that Dunkin’ was “approaching saturation in its core Northeast markets.” Dunkin’ opened its first outlets in California in 2015.