Blackstone Said to Be Seeking Sale of Burger King Franchisee

Blackstone Group LP (BX) is seeking a buyer for Heartland Food Corp., the second-biggest owner of Burger King restaurants, a person with knowledge of the situation said.

The private-equity firm is looking to unload the business, which it acquired through its GSO Capital Partners LP unit, according to the person, who asked not to be identified because the deliberations are private. Blackstone bought GSO, a credit manager run by Bennett Goodman, in 2008.

Heartland, founded in 2003, owns about 330 Burger King locations in eight Midwest states. Based in Downers Grove, Illinois, the company has annual sales of more than $420 million, according to its website. While declining to discuss Heartland’s future plans, Burger King Worldwide Inc. (BKW) spokesman Miguel Piedra said the franchisee has been evaluating its business.

Burger King “supports Heartland’s efforts and will work closely with its leadership moving forward,” Piedra said in an e-mail. Peter Rose, a spokesman for New York-based Blackstone, declined to comment.

Heartland would be seeking a buyer during a time of sluggish fast-food demand. Industry sales rose just 0.7 percent last year to $196.1 billion in the U.S., according to research firm IBISWorld Inc. Burger King, based in Miami, said earlier this month that revenue fell 6.1 percent to $261.2 million in the second quarter.

Photographer: Andrew Harrer/Bloomberg

Heartland, founded in 2003, owns Burger King locations in eight Midwest states. Close

Heartland, founded in 2003, owns Burger King locations in eight Midwest states.

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Photographer: Andrew Harrer/Bloomberg

Heartland, founded in 2003, owns Burger King locations in eight Midwest states.

Stock Gain

Still, Burger King’s stock has been outperforming its fast-food peers. It has gained 16 percent this year, while the Standard & Poor’s 500 Restaurants Index has dropped 1.3 percent. The shares rose 0.7 percent to $26.61 at the close in New York.

More than 99 percent of Burger King’s 13,800 locations worldwide are franchised, meaning an independent business owns and manages the stores. There are about 7,370 Burger King restaurants in the U.S. and Canada.

Carrols Restaurant Group Inc. (TAST) -- the largest Burger King franchisee, with about 560 locations -- reported a 2.8 percent decline in restaurant sales during the second quarter. Fewer low-price promotions hurt results, the company said.

Even so, Syracuse, New York-based Carrols plans to continue acquiring restaurants. It added 29 locations this year and is reviewing or negotiating other transactions, Chief Executive Officer Daniel Accordino said earlier this month. That may result in the purchase of more than 100 restaurants in 2014, he said. Carrols and Heartland didn’t respond to requests for comment.

In 2012, Burger King sold 278 of its stores to Carrols for 29 percent of the franchisee’s stock and about $16 million.

“As part of an overall business strategy, franchisees may acquire and/or sell Burger King restaurants,” Piedra said.

To contact the reporters on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net; Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland, John Lear

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