|By Elaine Walker, The Miami
HeraldMcClatchy-Tribune Business News
Dec. 27, 2006 - --Burger King's second-largest franchisee, Heartland Food Corp. headed by Miamian Al Cabrera, is cashing out the majority of its business.
Heartland will close today on a deal to sell more than 240 Burger King restaurants to GSO Capital Partners. The cash deal with the New York hedge fund is for $155 million.
Cabrera, chairman and majority owner of Heartland, said the plan was always to turn around struggling restaurants it acquired over the past several years and sell them for a profit.
Heartland was created to buy up troubled Burger King restaurants, as franchisees across the country faced financial problems because of the company's years of sales declines.
"It's time to climb another mountain," said Cabrera, who will still retain his original 10 Burger King restaurants in South Florida. "Our horizon was always three to five years. We've done a lot better than we expected. I don't think anyone has come in at the bottom and gone out on top like we have."
Cabrera's Heartland team made its first major acquisition in 2003, when it paid $16 million for 131 restaurants owned by Burger King's largest franchisee AmeriKing, which was selling off its restaurants as part of a bankruptcy liquidation.
After the AmeriKing acquisition, Heartland made another 22 acquisitions paid with cash flow from the business. In total, Cabrera says his group spent about $25 million on acquisitions, but the key was that the restaurants were bought for well below market rate at an average cost of less than $100,000 per restaurant.
Today the picture is quite different. Cabrera's team has increased sales at some restaurants as much as 40 percent. At the same time, Burger King has show significant progress in its own turnaround and taken the company public. Add to that, a capital climate flush with private equity money looking for investments, and Cabrera's team found the phone ringing.
"In the past year, we've garnered a lot of interest," Cabrera said. "There's a need to invest capital, and they're looking for good companies."
A Burger King spokeswoman said the company does not comment on pending business matters. Representatives of GSO Capital Partners did not return requests for comment on Tuesday.
For Cabrera, who has been a Burger King franchisee since the mid-1980s, the time was also right. The performance of Heartland Food has opened the doors to a variety of other opportunities with other franchises.
Next on the agenda: hotels. Cabrera has plans to build or acquire 100 hotels within the next five years, focusing on the East Coast of the United States.
He has secured capital investors and is working with several of the major brands owned by Intercontinental Hotel Group and Marriott International. Construction on the first five hotels should begin within the next eight months.
"It's about operations, marketing and franchising. That's pretty familiar ground to me," Cabrera said.
Miami Herald staff writer Christina Hoag contributed to this story.
Copyright (c) 2006, The Miami Herald
Distributed by McClatchy-Tribune Business News. For reprints, email firstname.lastname@example.org, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. NYSE:BKC, NYSE:MAR,