Checkers Holdings Inc., the Tampa-based parent company of Checkers & Rally’s chain of fast-food restaurants, has received a $20 million capital injection that CEO Frances Allen said will be used to significantly upgrade kitchen equipment and make its eateries as contactless as possible as it embarks on an aggressive, five-year growth plan.
The funding comes from Oak Hill Capital Partners, the Chicago-based private equity firm that owns Checkers & Rally’s. Principal Peter Armstrong, in a press release, said the strong performance of Checkers & Rally’s in 2020 gave the firm confidence to up its investment. He stated that both company and franchise stores enjoyed high single-digit same-store-sales gains in the high single digits, and he sees that momentum continuing into 2021.
“Checkers has demonstrated strong performance period after period despite the significant challenges brought by the events of 2020,” Armstrong states. “We have great confidence in the Checkers management team, and we are pleased to support them in their plans for the future.”
Checkers & Rally’s CEO Frances Allen took some time this week to discuss the plans with the St. Pete Catalyst.
“We had an extremely good year in 2020,” Allen said, “and that has enabled us to put together a very aggressive growth plan, and obviously give our investors a lot of confidence.”
The $20 million from Oak Hill, she said, will be used to further support sales and operations initiatives that were rolled out in 2020, but it will also help fund a major overhaul of kitchen equipment a new look for the restaurants that doubles down on contactless elements that have proven to be popular with guests during the coronavirus pandemic.
“The new kitchens will have all-new equipment, a lot of new equipment put in different places to just make the labor efficient and enable us to serve the customer a much better product,” Allen said. “There will also be some more crew comforts.”
Allen said to expect the first new-look Checkers restaurant to open in Lakeland sometime this summer. It will undergo testing and evaluation before being rolled out to the rest of the Checkers & Rally’s system.
The new year will also bring a bevy of new Checkers & Rally’s restaurants, Allen said, with 72 already in development “across multiple markets,” though she doesn’t expect all of them to open in 2021. The company has also approved and onboarded 40 new franchisees over the past year.
“They are excited to join the brand,” Allen said. “They see the small footprint and double drive-thrus as ‘pandemic proof.’ And the small footprint coupled with a modular building makes it very affordable for people to get into the brand.”
Despite the surge of interest, Allen said, franchise fees will remain unchanged.
Like Oak Hill, Moody’s Investors Service is also high on Checkers & Rally’s, whose annual gross revenue is approximately $300 million. On Thursday, Moody’s upgraded its outlook on the company’s creditworthiness from negative to stable, albeit with some words of caution from senior credit officer Bill Fahy: “Despite the company’s improved operating performance and additional liquidity provided through additional second-lien debt, Moody’s believes that Checkers’ ability to improve operating performance to a sustained level that will generate the free cash flow necessary to service its debt and preferred equity on a cash basis remains uncertain.”