James Bodenstedt, founder of Muy Cos., sold 755 restaurants in a $1B grand exit.
In New York City last summer, James Bodenstedt presented a single sheet of paper with four columns of type to two hand-picked prospective buyers. “One column for each of the brands, and then a total,” recalled the founder of Muy Cos., who sold all 755 of his Taco Bell, Pizza Hut and Wendy’s restaurants in a $1 billion-plus grand exit last October.
Bodenstedt kept it simple. “What is the price? How did I get to it? What is the equity I have to put in? Am I going to make money and how?” His goal was to present a deal he knew could get done in six months, before Congress changed the capital gains rate (as people feared but never happened) and employees worried too much about their future.
Multiples of cash flow were likewise non-negotiable: “Taco Bell, 9. Wendy’s, 7. Pizza Hut, 6,” take it or leave it, he declared, then described the typical auction process with disdain. “Fifty books. 10 bids. Five highest offers. Three best of offers. And a buyer.” What a waste of time.
“I don’t go fishing, I go catching,” said the almost life-long Texan who sold all his property in San Antonio and is relocating to Europe. “I don’t go to try to sell my business. I go to sell my business.”
For Bodenstedt’s longtime investment banker, selling 85 Taco Bell, 352 Pizza Hut and 318 Wendy’s restaurants in six months seemed a “nearly impossible” task, said Chris Kelleher of Auspex Capital. Not to mention 25 fee properties, the corporate office and the corporate aircraft for an aggregate price “well in excess of $1 billion. It was the second largest QSR industry M&A transaction ever,” the nomination form said.
James Bodenstedt, left, with three members of his former Muy Cos. executive team, all newly minted millionaires.
As a result of the acquisitions, Shoukat Dhanani and his newly formed company Ayvaz Pizza became the second-largest franchisee in the Pizza Hut system; he’s also a giant Popeyes and Burger King franchisee. Sentinel Capital Partners is the financial backer.
His brother Ali Dhanani, of HAZA Bells and HAZA Foods, bought all of Muy’s Taco Bells and about half of the 318 Wendy’s. He wanted to buy all the Wendy’s but corporate has an “unwritten rule” against any franchisee having more than 400 locations, Kelleher said. Four other franchisees bought the remaining Wendy’s.
Kelleher said Auspex’s “substantive relationships” with decision makers at Taco Bell, Pizza Hut and Wendy’s helped to close the 17 separate transactions by the October 2021 deadline imposed by Bodenstedt.
“Finally, James’s extensive experience as a dealmaker, and his great leadership and trust, was essential to the success of the deals,” the nomination form said, but during an interview the conversation about meeting the deadline turned playful. “Were you cracking the whip?” I asked Bodenstedt. “Two whips in each hand,” Bodenstedt joked. “Several of them. Several of them,” said Shriram Chokshi of Auspex Capital.
Bodenstedt praised the team at Auspex Capital. “I made a mistake early on,” buying a group of restaurants without the proper diligence, and he learned from that experience not to diagnose his own illness or prescribe his own meds. “I don’t draw my own blood. Experts do what they do and that’s what Auspex does for us,” he said. “Deals come up spontaneously, so you have to be able to respond spontaneously,” and the client and investment banker executed 84 total transactions, including about 40 restaurant acquisitions, over his career.
The turning point for Muy Cos. came in 2010/11, “when we rounded out our team,” with a chief legal officer, a chief information officer and other executives. Bodenstedt believes in giving equity to people far deeper in the ranks than just the top three or four officers. “Our CIO, CFO, chief people officer, directors of ops, second in commands, chief pilot. Seventeen people, and they all became millionaires at the end.” When other operators came calling with job offers, “our team had a higher net worth than the people trying to hire them,” he said.
Bodenstedt, age 55, is one of former President Trump’s largest campaign contributors, giving more than $400,000 to his reelection campaign for 2020. He at first thought he’d sell his restaurants a few years from now. Why? “Because this business has a certain pattern. People are growth-minded” at first. “Many people become less risk-tolerant and stop growing and then the organization starts to lose value.”
Then when President Biden took office—Bodenstedt is not a fan—and Congress talked about raising capital gains taxes, he called the executive team together and presented the case for selling the business now. “My recommendation was, if you’re ready to go, I’m ready to go. Everybody raised their hand,” Bodenstedt said. “I’m proud that everyone made the decision together and we executed.”
Asked how it feels to exit his life’s work, he said, “I always approached the business as, we never really owned the business. We just borrowed it. I feel really good about our stewardship. I’m not an entrepreneur. I’m anti-entrepreneurial. I’m lazy, if you would. I just put together the team,” he said.
Asked about the low point at his company, and he answers immediately. “Friday, March 13, 2020. The day America closed down,” he recalled. “My Northeast restaurants were the canary in the coal mine.” On or about March 11, they had a call. “We would draw down all of our lines of credit because when you need money you can’t access it. It was a really good decision. I was in contact with David Gibbs,” the CEO of Yum Brands, each of his brand presidents, “the governor of the state of Texas and the White House. By the morning of the 16th we put in a plan to conserve cash,” he said.
That day “has been the worst day of business ever. I was concerned I would not have a business, out of my control.” At a Harvard Business School course, “I heard this: Companies never fail they just run out of money, and I thought that could happen to me.”
How does he feel after his mic drop? “I started at McDonald’s at minimum wage,” at age 18, and now his restaurants sold for more than $1 billion. “It’s not the minimum wage business. It’s the maximum opportunity business,” he said.
“I certainly love what I did. I’ll miss the people I interacted with. Life goes on,” he said. As if on cue, up drives his former chief people officer in a brand new Porsche 911 Turbo.
So Muy’s newly minted millionaires aren’t saving their money? “They’re doing all they can do to help with that inflation,” he said with a laugh, then added one last jab at President Biden. “Let’s go Brandon.”
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Muy Cos. Founder Makes $1B Exit With Sale of 755 Restaurants - Franchise Times
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