• Tue. Jan 31st, 2023

third buyer is the franchisee charm of the biggest rally | Franchise mergers and acquisitions

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Joe Hertzman accepts a moment alongside his wife Kelly at the Rally’s annual awards banquet last year. Hertzman was a Rally’s franchisee for more than 35 years before selling all 30 units at the end of 2021.


Joe Hertzman sold his status as Rally’s largest franchisee with his 30 units last month after the first two serious buyers failed. Its rally restaurants, located in Kentucky and Indiana, were sold to multi-brand franchisee Falcons Burger, run by Shamsu Charania.

“The Falcons were luckily the right group,” Hertzman said. “They are the brand’s second franchisee and had the financial strength to acquire us and commit to the kitchen renovations and re-equipment that the franchisor requires over the next few years.”

But it took almost a year to find the right buyer. Last January, a group of stocks again negotiated or renegotiated the price of the transaction before signing, “so we parted ways,” Hertzman said. Then a second group emerged as top contenders in the summer of 2021, made up of a few Harvard MBA graduates who have spent the past 10 years on Wall Street, saving money to grow their own portfolios.

“They seemed like really good guys,” Hertzman said. However, Rally’s “didn’t feel like they had enough financial strength to support 30 stores, so they weren’t approved.”

Adding to the madness of the sales process, Hertzman only owned four of his 30 properties, so he had to obtain 26 landlord consent signatures for the leases.

“It has been a difficult year. It took a lot of work for me, keeping my head down every day until we got it done,” Hertzman recalled as his team raced to seal the deal by the end of 2021. “ Luckily, thanks to my operations team, I didn’t have to worry much about operations. They were phenomenal, so my job was to try and get that deal done.

Hertzman, 65, admitted bittersweet sentiment came with the sale of Rally’s, a restaurant chain he has been part of since he was 29. But it was time to reevaluate his priorities, including helping his 23-year-old son get his business started with a five-unit development deal with Jersey Mike’s Subs. “I’m extending the opportunity my dad gave me, and I’m very excited about it,” Hertzman said.

“I think I left (Falcons) with a very solid company with a great opportunity for growth, and I wish them well,” he added.

Unbridled Capital provided sell-side advisory services to the Hertzman family for the transaction.

A family of franchisees

Hertzman’s family got into the franchise when family friend Jim Patterson opened a restaurant called Jerry’s. Hertzman described it as a combination of Denny’s and Sonic: a full-service sit-down restaurant with sidewalk service. Patterson then created a seafood brand called Long John Silver’s.

Hertzman’s father, Charles, sold his Jerry’s and became a franchisee of Long John Silver’s, where Hertzman began working at age 14 after school and occasionally on weekends. “They wouldn’t let me do much, but I loved being there,” said Hertzman, who eventually rose through the ranks to run his father’s business by the time he graduated from college.

Formerly under the Yum Brands umbrella, Long John Silver’s was acquired in September 2011 by a group of franchisees as LJS Partners.

Patterson created another brand in 1985, Rally’s in Louisville, Kentucky. Hertzman signed its first Rally development agreement in 1985 and opened its first restaurant in Evansville, Indiana the following year. It expanded its portfolio to 36 restaurants at one point before closing a few underperforming stores.

Rally’s was purchased in 1996 by CKE Restaurants – the parent company of Carl’s Jr. and Hardee’s – who sold it to Checkers three years later. The combined chain offers American fare such as burgers, fries, chicken wings, hot dogs and ice cream. Checkers and Rally’s is owned by investment firm Oak Hill Capital Partners and has more than 840 units in the United States.

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