Accelerating Multi-unit Expansion


Company

Industry

Checkers Drive-In Restaurants, Inc.

Food / Restaurant; Franchising

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Accelerating Multi-Unit Expansion


Company: Checkers Drive-In Restaurants, Inc.

Position: Food / Restaurant; Franchising

Location: Tampa, Florida

Date of Investment: March 2014

Exit Date: April 2017


Company Description
Checkers & Rally's Restaurants, Inc. is an iconic and innovative drive-thru restaurant chain with 850 restaurants and room to grow. Checkers & Rally's differentiates itself by delivering high quality, craveable meals at exceptional values. Checkers and Rally's, together with its outstanding franchisee partners, offers a distinctive menu focused on bold, innovative products that are delivered to guests with category-leading value.

Background
Sentinel was introduced to Checkers as part of an auction process. When the sellers decided not to sell at that time, Sentinel continued to track the business and maintain a dialogue with the owners. In late 2013, we learned that the owners were interested in a negotiated sale, and Sentinel was chosen as a result of our credibility in the franchising and restaurant sectors, our demonstrated interest in Checkers after the abandoned auction, and management’s favorable view of us during the initial due diligence.

The Opportunity
To accelerate the growth of a proven concept with attractive ROIs by implementing and executing strategies to recruit new franchisees, grow the number of restaurants, and expand the brand in core markets.

Accomplishments
Improved Unit Economics: Sentinel worked with senior management to improve unit economics by (i) adjusting late-night operating hours, (ii) lowering food costs by reducing waste, and (iii) improving labor costs through productivity initiatives. In addition, Checkers was able to reduce its build-out cost for new units by launching new lower-cost versions of its prototypes. With improved unit economics, new unit openings became a more attractive business opportunity for franchisees and company-owned restaurants.

Consistent Same-Store Performance: During Sentinel’s ownership, same-store performance improved each year. Senior management developed initiatives to launch new value-based products for late night, dessert, lunch, and dinner occasions. These initiatives proved more sustainable than limited-time promotions and had a permanent effect across the Checkers system.

Building a Robust Pipeline: As a result of improved unit economics and consistent same-store performance, Checkers was able to rapidly grow its franchised restaurant base and build a robust pipeline for future store openings. At the end of 2016, Checkers’ backlog of new franchised restaurants exceeded 100.

Outcome
During Sentinel’s three-year hold period, unit economics and same-store performance improved each year; and the total restaurant count increased by 59 units. In April 2017, having achieved our investment objectives, Checkers was sold in a management buyout to another private equity firm.

Massage Envy, LLC

Consumer; Franchising

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Accelerating Multi-Unit Expansion


Company: Massage Envy, LLC

Position: Consumer; Franchising

Location: Scottsdale, Arizona

Date of Investment: December 2009

Exit Date: August 2012


Company Description
Massage Envy was founded in 2002 to capitalize on the significant unfulfilled demand for professional, affordable, and convenient therapeutic massage services. At the time of our purchase, Massage Envy was a leading franchisor of therapeutic massage services through a network of approximately 600 clinics.

Background
Sentinel was introduced to the opportunity by independent sponsor Princeton Ventures, who had developed a relationship with Massage Envy’s CEO. Princeton approached Sentinel because of our experience in growing franchise brands and established record closing transactions.

The Opportunity
To accelerate the growth of a proven franchise concept by implementing and executing strategies to recruit new franchisees, grow the number of clinics, and expand the brand nationwide.

Accomplishments
Identified Optimal Locations: Sentinel worked closely with management to make a significant investment in software and management talent to identify real estate locations with a high likelihood of success. This initiative enabled Massage Envy to more than double its annual openings while maintain its almost-zero new clinic failure rate.

Created Financing Program to Accelerate Unit Growth: Sentinel secured a dedicated financing program to accelerate new unit growth during the very difficult debt financing market following the 2009 recession. This program enabled franchisees to open more than 36 units during a period when access to debt markets was seriously curtailed.

Optimized Clinic Operations and Introduced New Service Offerings: During our ownership, we assisted management in analyzing how to enhance member retention, increase capacity utilization, and reduce therapist turnover. We also worked with management to launch facial treatments to augment core massage therapy services. These initiatives accelerated sales growth, materially enhanced unit-level economics, and widened Massage Envy's industry leadership position.

Augmented Management Team: Sentinel worked with senior management to recruit additional marketing and development executives and broaden and deepen Massage Envy's overall management team. The new executives hired were smoothly integrated into the company and strengthened the infrastructure needed to sustain Massage Envy's rapid growth.

Outcome
During Sentinel's approximately three-year ownership, Massage Envy grew from approximately 600 to nearly 850 operating clinics with a backlog of more than 270 clinics waiting to open. With systemwide sales nearly doubling and the average unit volume increased significantly, revenue and EBITDA almost tripled. In August 2012, Massage Envy was sold in a management buyout to another private equity firm.

Metro Dentalcare, Inc.

Healthcare

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Accelerating Multi-unit Expansion


Company: Metro Dentalcare, Inc.

Position: Healthcare

Location: Richfield, Minnesota

Date of Investment: May 2005

Exit Date: September 2007


Company Description
Metro Dentalcare is a multi-unit dental practice management company located in the Minneapolis/St. Paul market. Its clinics and affiliated dentists offer general, orthodontic and specialty dental care. At the time of our investment, Metro Dentalcare provided business and administrative support to 23 clinics, which offered a range of state-of-the-art preventive, restorative, pediatric and cosmetic dental services to more than 125,000 patients annually. Its strong brand name and reputation for delivering high quality dental services made Metro Dentalcare a preferred service provider for many of the largest employers in Minnesota.

Background
Metro Dentalcare was founded by two dentists in 1968 as a single-location dental practice. Together, they grew through de novo clinic openings and acquisitions of small dental practices. By 1995, Metro Dentalcare was operating nine clinics, all in Minneapolis/St. Paul. In June 1995, Metro Dentalcare merged with seven dental centers owned by Delta Dental of Minnesota, one of the largest dental insurance providers in the United States. The two dentists and Delta Dental became 50:50 owners of Metro Dentalcare. After the merger, Metro Dentalcare continued to open new units and 10 years later was operating 23 clinics. In 2005, Delta made a strategic decision to exit the business of providing dental services and permitted the two founding dentists to find a new partner.

The Opportunity
To partner with an exceptional management team and accelerate Metro Dentalcare’s growth through acquisitions and de novo clinic openings, further establishing the business as the clear market leader in the Minneapolis/St. Paul market.

Accomplishments
Structured Transaction to Position Metro Dentalcare for Growth: Sentinel overcapitalized the business so that Metro Dentalcare had the flexibility to accelerate its growth via acquisitions and de novo clinic openings.

Supported a More Aggressive New Clinic Growth Strategy: We helped management develop a plan to accelerate the build-out of new clinics and the pace of acquiring independent, dental practices in the Minneapolis/St. Paul market.

Strengthened Metro Dentalcare’s Capabilities: Sentinel supported management as they further developed the back office infrastructure and supplemented their team with additional talent. Metro Dentalcare also acquired a dental lab which reduced costs and enhanced its full service offering.

Outcome
In less than three years, Metro Dentalcare had opened or acquired 12 new clinics at the rate of approximately five per year, much faster than the two-per-year pace under prior ownership. With 34 clinics in operation, profitability more than doubled and the business had achieved the scale that made it attractive to a large strategic buyer. In September 2007, having successfully accomplished our investment objectives, Metro Dentalcare was sold to publicly-traded strategic buyer American Dental Partners (NASDAQ: ADPI) in a highly successful transaction for Sentinel and its management partners.

Northeast Dental Management Inc.

Healthcare

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Accelerating Multi-unit Expansion


Company: Northeast Dental Management Inc.

Position: Healthcare

Location: Paramus, New Jersey

Date of Investment: April 2012

Exit Date: January 2016


Company Description
Northeast Dental is a multi-unit dental service organization with affiliated clinics located in seven states along the “Amtrak Corridor” between Virginia and Massachusetts. NEDM provides administrative staffing, human resources, purchasing, financial, and IT support services to 65 locally-branded dental offices. NEDM's affiliated offices provide the highest quality dental care to nearly 200,000 patients annually, and offer a full suite of best-in-class general and specialty dental services, including general dentistry, oral hygiene, oral surgery, periodontics, pedodontics, and orthodontics.

Background
NEDM was founded by Dr. Craig Abramowitz in 2003 when he acquired a single office in New Jersey from a large publically-traded dental service organization. Together with his dentist partners, Dr. Abramowitz grew NEDM through affiliations with several multi-office practices in nearby states. Along the way, a small private equity firm invested in NEDM to provide additional capital for growth. By 2012, NEDM had grown to 29 affiliated offices in New Jersey, New York, Pennsylvania, and Virginia and NEDM’s investors were ready to monetize their investment. NEDM hired an investment bank with which Sentinel has a strong relationship to find a new financial partner for Dr. Abramowitz. Sentinel was selected because of our established record of successfully investing in the dental services sector and the strong relationship we had with Dr. Abramowitz and NEDM’s management team.

The Opportunity
To partner with NEDM’s founding management team, accelerate growth through new affiliations, and establish NEDM as the subconsolidator of choice in the Amtrak Corridor.

Accomplishments
Supported an Aggressive Growth Strategy: Sentinel helped management build a business development function to create an acquisition pipeline of new affiliate practices. This initiative significantly enhanced NEDM’s capabilities to source, execute, and integrate acquisitions. Under Sentinel’s ownership, NEDM completed 24 new add-on affiliations—more than one new office per month at the time of our exit—while substantially growing its future affiliation pipeline. NEDM increased its office density in existing states and expanded its footprint into adjacent states with new affiliated offices in Connecticut, Maryland, and Massachusetts.

Strengthened NEDM’s Office Support Capabilities: To serve a rapidly growing group of affiliated dental practices, Sentinel and management worked together to further develop NEDM’s back office infrastructure. NEDM’s corporate team grew significantly as additional management talent was added in finance, purchasing, IT, and marketing. In addition, NEDM implemented a new, integrated IT system that simplified reporting and streamlined data collection and analytics.

Outcome
In under four years, NEDM grew its base of affiliated offices from 29 to 65, added three new states to its footprint, and more than doubled its revenue and EBITDA. In January 2016, having successfully accomplished our investment objectives, NEDM was sold to strategic buyer Dental Care Alliance in a highly successful transaction for Sentinel and its management partners.