2025 turned out to be quite an active year for restaurant mergers and acquisitions. Emerging chain Dave’s Hot Chicken sold a majority stake to Roark Capital in a sale reported to be over $1 billion. Some franchisees bought franchisors, with Sun Holdings acquiring Uncle Julio’s and Bar Louie. A cohort of private equity firms are buying Denny’s. Even a c-store operator got in on the action, with RaceTrac taking the fast casual sandwich chain Potbelly private.
More buyouts from private equity firms and others are likely to continue into 2026, said Ye Cai, associate professor of finance at Santa Clara University.
Many chains, like Denny’s, have been struggling with same-store sales and traffic and are closing locations. That has led to stock prices falling — Denny’s stock fell from over $6 a share in February to $4 in late October before it sold itself, for example. Low stock prices present a good opportunity for a buyout, especially for investors equipped with turnaround strategies, Cai said.
“And from the [private equity] side, they're sitting on tons of dry powder, so they need to invest that money in some way,” Cai said. “Restaurant chains present a good investment opportunity, especially with recent interest rate cuts making borrowing costs lower.”
With valuations going down, chains are under considerable pressure from public markets to perform and to do it quickly. But it takes time for turnaround strategies to go into effect, much longer than one quarter, if not a few years, Cai said. Starbucks just reached flat same-store sales a year after CEO Brian Niccol began his turnaround plan.
“Many restaurants are facing similar economic pressures and they need some fundamental changes, probably to really renovate their product, and also improve their operational efficiency,” Cai said. “That’s when PEs could really come in and use their expertise to help improve the agility of the operation.”
Private companies have more runway to get their turnaround strategies moving, Cai said. Private equity firms, especially those with portfolios that include other brands, could use their buying power to optimize supply chains by using one vendor, Cai said. These companies also have technology to drive back-of-house efficiency and augment data analytics capabilities, which could help troubled brands figure out how best to meet guests needs, she added.
Oftentimes, when private equity firms take over, the restaurant receives fewer health violations, the food quality improves and there typically aren’t layoffs, Cai said.
“It’s a net positive benefit of PEs taking over those restaurant chains,” Cai said. Though there are notable failures in PE restaurant acquisitions, like Red Lobster’s tenures under Golden Gate Capital, which sold Red Lobster’s real estate in a sale leaseback deal that saddled the casual chain with high rent costs.
Cai said she expects private equity firms to continue their buyouts for at least the next six months, which could mean more companies going private. Yum Brands is looking to sell Pizza Hut, for example. Denny’s said it received many interested buyers as well, which means those that didn’t end up being part of that buyout could be looking for other chains in the restaurant or coffee shop area, Cai said.
Check out some of the biggest and most impactful M&A deals of 2025.
