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Yum Brands Buys The Habit

IRVINE -- Yum Brands is adding burgers to its menu with an agreement to acquire the operator of fast-casual restaurant chain The Habit Burger Grill for $14 per share or $375 million in cash, according to an announcement by the two companies on Monday.

The Habit Burger Grill is the first foray into the fast-casual category for the parent of KFC, Taco Bell and Pizza Hut. Fast casual is defined as fast food but with higher quality ingredients and a higher price point than its quick-service rivals.

The burger concept was founded in 1969 when it opened its first location in Santa Barbara, Calif. The Habit Burger Grill competes with chains such as In-N-Out Burger, Five Guys and Shake Shack and is known for its chargrilled burgers, chicken sandwiches and ahi tuna sandwiches, as well as its salads and frozen treats.

“We’ve emerged from our three-year transformation stronger and in a better position to accelerate the growth of our existing brands and leverage our scale to unlock value from strategic acquisitions,” said David Gibbs, Yum Brands’ CEO, in a statement.

The Wall Street Journal reports that this is Yum’s first acquisition of a “stand-alone fast-casual restaurant chain since the company went public in 1997.”

“The transaction is a win-win because it allows us to offer an exciting new investment to our franchisees and to expand an award-winning, trend-forward brand through the power of Yum!’s unmatched scale and strengths in franchising, purchasing and brand-building,” Gibbs added.

The deal is subject to approval by the shareholders of The Habit Restaurants, parent of The Habit Burger Grill, and is expected to close by the second quarter.

The Habit Restaurants over the past two years has entered into delivery partnerships and launched online ordering, a mobile app, restaurant kiosks and drive-thrus to improve the customer experience, according to the announcement. Between 2009 and 2018, the chain increased its company-operated restaurant average unit volumes by 49.9%, from $1.2 million to $1.9 million.

The Habit Burger Grill will remain based in Irvine, Calif., with Russell Bendel and Ira Fils remaining as the company’s CEO and CFO, respectively.

The restaurant chain was named Best Regional Fast Food in USA Today’s 2019 Best Readers’ Choice Awards. It has more than 270 restaurants in 13 states, including California, Arizona, Utah, New Jersey, Florida, Idaho, Virginia, Nevada, Washington, Maryland, Pennsylvania, North Carolina and South Carolina, plus seven locations overseas.

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