Greg Flynn, CEO of Flynn Group, prefers to break up his company’s journey into chapters.
It’s an in-depth novel any aspiring restaurateur would pay to read.
Over two-plus decades, the entity transformed into the largest franchisee group in the world. As of January, Flynn Group had more than 2,600 units, over $4.5 billion in annual sales, 30 percent annualized growth, and more than 75,000 employees.
COO Brad Pettinger was among the first to see the start of the vision. The executive vividly remembers being connected through a headhunter, back when Flynn was running World Wrapps restaurants on the West Coast. Pettinger recently tore his Achilles tendon and had a bright pink cast, but he hobbled to San Francisco to visit a store that was reportedly doing an “unbelievable volume” out of an 800-square-foot building. When he arrived, the shop had to shut down because it was so busy. Everything had to be restocked.
Consider that the prologue.
“Greg’s never met a deal he didn’t want to do,” Pettinger says. “So I don’t think there was ever a cap on where we thought we would go. We’re constantly amazed at where we’ve gone. And I think we’re really proud of the culture we’ve built that enabled us to add on every other couple of years. I don’t think there’s a limit to what we want to do. It’s just what’s available.”
The Birth of a Dynamic Franchisee
Chapter one involved growing Applebee’s from 1999 to 2012.
During that time, Flynn Group’s sole focus was the casual-dining chain. The strategy served them well as the company jumped from 10 stores to 72 to over 400, becoming the world’s biggest Applebee’s operator in the process.
Flynn Group entered the system at a time when sit-down concepts had significant momentum. Leading up to COVID, Applebee’s was more of a challenged brand, causing the chain to close about 300 U.S. stores over roughly five years. However, thanks to an emphasis on value, digital, off-premises, and marketing toward younger consumers, the brand experienced historic sales figures during the pandemic—numbers it hadn’t seen since it combined with IHOP in 2007.
Dan Krebsbach, who serves as Applebee’s president under Flynn Group, says growth began when the chain formed a stronger connection with guests.
“We even had an ad that just marketed toward recognizing our regulars because it’s not uncommon to walk into one of our restaurants and see the same faces there, maybe around the bar or at a table consistently,” Krebsbach says. “Those are all key ingredients. Right after the pandemic, we reduced the menu and that has also helped with greater execution and speed of service. And we have stayed that course. We haven’t gone back to inflating the number of items on the menu and I think that has really helped.”
The second chapter began in 2013 when Flynn Group recognized it was time to do more. The company decided to diversify domestically in a way that mirrored the composition of the restaurant industry. Listening to the market and the marching of consumers’ feet, the franchisee group knew quick service was the next logical jump. Not only that, but Flynn Group made it a priority to only involve itself with the best brands in the segment.
With that mindset, entering Taco Bell 11 years ago was a no-brainer. Flynn Group acquired 76 restaurants and has since expanded the footprint to 280-plus stores, nine states, and more than 7,800 workers. The operator is now the third-largest Taco Bell franchisee in the world. By 2015, Flynn Group had its target on a swiftly growing fast-casual segment. Chipotle wasn’t an option—one, because it’s completely corporately owned, and two, because even if it were franchisable, it would likely be a direct competitor to Taco Bell. This made Panera the easy choice. Flynn Group splashed into the bakery-cafe concept by purchasing 47 locations and building it to 125-plus restaurants in eight states. After that growth, the company became the second-biggest franchisee in Panera’s footprint. In 2018, Flynn Group took an even bigger leap by buying 368 Arby’s stores to become the brand’s biggest operator.
But no acquisition quite matches the latest one on record. In 2021, Flynn Group bought 937 Pizza Hut and 194 Wendy’s locations for $552.6 million from bankrupt franchisee NPC International. The company nearly doubled its restaurant count as a result of the purchase.
“It gave us an opportunity through one transaction, albeit very complicated, to get it to scale in both systems,” CFO Lorin Cortina says. “We had a distinct advantage over virtually anybody else in the process because we’re probably the only, if not only a couple, qualified bidders who could complete the entire acquisition in a single transaction as opposed to multiple bidders. So we had the credibility across the franchisors, and more importantly, we had the credibility across the financial markets to raise capital during a difficult time.”
So after years of being casual dining only, Flynn Group is now majority quick service, giving the company a unique perspective across multiple categories. According to Flynn, one thing is clear—there’s lots of blurred lines, and there has been for a while. For instance, KDS systems began in quick-service stores where a customer would order at the counter and the ticket would go up on a screen for back-of-house workers to view and complete. Initially in full service, there were handwritten tickets that would get handed back to the cooks. Eventually, KDS systems entered sit-down occasions, with many servers inputting orders onto a tablet, which then automatically transfers to the kitchen.
Off-premises has become more ubiquitous as well, even before the pandemic. Flynn remembers in the early 2000s when Applebee’s developed carside to-go. Not exactly a drive-thru experience, but pretty similar. And in many cases, it takes less time than a drive-thru lane because all orders are made in advance. He also points out Applebee’s has tested a mobile order pickup window that mimics a quick-service drive-thru lane.
“That’s one of the reasons when COVID hit Applebee’s was so well-positioned to grow,” Flynn says. “It’s all business because we had already been doing it. A high level of efficient carside to-go business for 20 years at that point. And we had all the systems in place and we had the parking spaces and we had the notification, we had the app and we had the KDS set up. So there are lots of mobile opportunities.”
Flynn Group’s quick-service sector hasn’t been a slouch, either. Rasheeda Clark, Wendy’s brand president, says, “It’s an exciting time to be in the Wendy’s business.” Backing up her point, the fast-food chain’s 2023 was filled with innovative news, like testing drive-thru automated voice ordering with Google Cloud, experimenting with an underground delivery system, and unveiling a Global Next Gen prototype designed to cut costs and embrace digital sales.
“Ultimately a consistent guest experience, time, time, and time again is the only way to survive in this business,” Clark says. “I think it is ensuring that you don’t fall behind industry trends to stay relevant. Technology is one of those things you can delay if you want, but if you delay, you don’t stay up to trends, and you will fall behind.”
Development, either by organic expansion or additional acquisitions, is still in play for all of Flynn Group’s restaurant chains. The pace of that, Flynn says, is driven primarily by unit economics—the cost to build a restaurant, the sales and profits, and either an attractive or unattractive return. In general, he believes quick-service brands are experiencing better unit economics these days because building full-service locations is a lot more expensive. They also tend to have lower margins than fast-food outlets. Sales have grown in casual dining, but not enough to mitigate rising costs in labor, equipment, and other categories.
COVID forced numerous full-service restaurants to close, making second-generation opportunities a more viable option for growth in the post-pandemic period. Applebee’s is one of several bigger chains capitalizing on this availability. Meanwhile, Flynn Group announced in 2023 that it acquired six Applebee’s stores in Albuquerque, New Mexico, and plans to invest roughly $4 million in renovations for five of the locations.
On the quick-service side, Flynn predicted in September the company would open about 75 restaurants in 2023. There’s whitespace, but it’s competitive since everyone is gunning for pads with drive-thru space. That includes Pizza Hut, which now has a digital pickup window it calls “the Hut Lane.”
Flynn Group doesn’t have any explicit goal to be the biggest in any of its restaurant brands, or even in aggregate, even though it already is by a significant margin. Implicitly, the objective is to realize scale economics in the business. The other advantage of having a meaningful footprint is it provides a relationship with the franchisor. For all of its chains, Flynn Group has a seat at the table to discuss all challenges and opportunities.
“And for us being in six different brands, we have a wide view of the whole industry,” Flynn says. “In some cases, we have a wider view than our franchisors. And we try to be very constructive around that—helping consider each of our brand’s problems with the benefit of the experience we have from our other brands. Now we need to be careful because we need to honor confidentiality between brands, and we are very careful about that, but that doesn’t mean there aren’t lots of general lessons that we can and have learned that we can bring to bear on any of our brands.”
Next Gear of Growth
When Flynn talks about chapter three, he references two major growth channels—one of those being international expansion.
“The good news is that international is unlimited opportunity,” Flynn says. “It’s a big world out there and there are literally millions of restaurants, and I don’t see why we can’t effectively operate internationally. But I wanted to be conservative about it and take baby steps out of the country.”
The move is already underway in Australia. In June, Flynn Group announced that it agreed to take over Pizza Hut’s roughly 260-unit master franchising business in the country. The chain is the second-largest pizza player in Australia, behind Domino’s, which has close to 800 units. With the backing of Flynn Group’s capital and franchising experience, Flynn says there’s no reason why Pizza Hut couldn’t reach at least 1,000 restaurants in the country.
The company looked at international avenues for a while, COO Ron Bellamy says. Flynn Group wanted to put capital to work, but with a brand it knows well, a geography that isn’t too different from the U.S., and a team it really believes in.
“We’ve seen a lot of success in adding brands and building scale in the U.S.,” Bellamy says. “And the question becomes, how can we do that in other regions? So Australia is the first step, which I think is a really good one in that it was a light first step. I mean, a heavy first step would have been to go buy 2,000 restaurants in Asia. Had that not gone well, that could really hurt us. And I think this is a really good first step to learn on. We feel really confident in it. But if, for some reason, it doesn’t break our way, life’s going to be OK. I don’t think that’s going to be the case.”
Establishing roots in Australia felt right in a lot of ways for the company. It’s the same language, there are good, nonstop flights to and from headquarters in San Francisco, and the residents have demonstrated an affection for American brands. Plus, Pizza Hut was already a high-functioning business in Australia with a 100-person team in place. Phil Reed, CEO of Pizza Hut Australia, has been in the position since 2018 and in the quick-service segment overall since 1984.
Flynn Group doubled down on its Aussie aspirations by agreeing to debut Wendy’s in the country—to the tune of 200 stores over 10 years.
“The combination of the two opportunities was serendipitous but excellent,” Flynn says. “It was a way to, in a low-risk way, get into an overseas market, but do it with a business that had growth potential. But then later on another business that we knew well with a partner we knew well on top of that, and now it can make it a much more substantial opportunity.”
Bellamy says restaurant culture is broadly similar between the U.S. and Australia. If a store has a high-performing manager and general manager, the restaurant is going to do well. The mechanics, however, are different. Flynn Group controls all the locations for Wendy’s and Pizza Hut in a country of 25 million people. Master franchising means it will work with smaller, local franchise partners who will own and operate the restaurants.
Pizza Hut sales in Australia are similar to the U.S. in that the cuisine was one of the least impacted food groups during the pandemic because of its close association with delivery and takeout. Previously, the brand was big on buildings with red roofs and sit-down occasions, but that’s significantly shifted to much smaller off-premises-only outlets. Flynn Group plans to do the same in Australia. As for Wendy’s, there is no asset base, so the company has the rare opportunity to configure the chain’s personality in the country.
“And for that, I think we really do have to take into account recent customer trends, how big the dining rooms have to be for us,” Bellamy says. “It’s going to be interesting too because we’ve got to balance what might be the most efficient with how to have the biggest brand impact coming out of the gate. So you might actually conclude as an example, hey, we actually don’t want a dining room. We think the right way to do this is it’s drive-thru and it’s carryout and it’s third-party delivery and that’s what we’re focused on and that asset might look like something. But we might say that’s not the way that we want to begin because we want to put a stake in the ground of what we’re going to be about and you might want those first couple of restaurants to look a little bit different. So we’ll have to play through that.”
The second half of chapter three was about entering consumer-facing brands outside of the restaurant industry. The company did just that in late 2023 by acquiring 37 Planet Fitness locations from Alder Partners, LLC. This prompted a change from “Flynn Restaurant Group” to simply “Flynn Group.” When the company was evaluating potential complementary segments, fitness became a primary target. Flynn Group said Planet Fitness fit its “investment thesis built on concepts that offer consumers a substantial value proposition and expertise in operating multi-unit and multi-state consumer facing franchised businesses.” At the time of the announcement in November, the company said it would continue growth under the current area development agreement and open three stores within the next four months.
There were reports in early February Flynn Group was looking to sell a majority stake in its business, which could be valued at more than $5 billion, including debt. Flynn later denied the rumors at the International Franchise Association Convention in February.
A Profitable Future
Flynn Group’s sales have been favorable since its recovery from the COVID pandemic. For the quick-service brands, it was a matter of weeks. For full-service, it took about a year. Flynn describes the comeback as “epic” in 2021 and “very strong” in 2022. The company was hit with inflation in the middle of its P&L in 2023, but strength in sales leads him to believe consumer demand—down to the lowest-income levels—remains robust.
Flynn has predicted a soft landing in the economy for a couple of years after a rise in real wages put more money in people’s pockets. The company is seeing consumers use that cash on restaurant experiences. Flynn Group took between 8-12 percent price in the past year and a half, but it hasn’t seen a material decline in traffic.
The company has built hundreds of restaurants—still actively doing so—but that’s limited by finding the right opportunities. Over the years, Flynn Group has acquired more restaurants than it’s developed, but done so at a cost that’s cheaper than constructing its own. The franchisee is almost everywhere in the U.S., with flags in 44 states. There are a couple of surprising markets that Flynn Group hasn’t cracked yet, like Arizona, Nebraska, and Connecticut. However, Flynn feels confident in reaching these places soon.
He’s also optimistic about the company adding another restaurant chain in the future. Taking competitive conflicts into consideration, there’s still space in segments like Asian, Mediterranean, steak, fine dining, coffee, and tea. Flynn Group will be careful with any choice it makes because there isn’t necessarily a need to tack on any more brands. Also, the company will keep its filter of only joining premier chains.
Flynn can’t say he had a vision of Flynn Group becoming exactly what it’s evolved into. But he can say he was always attracted to the prospect of growing something. He’s an entrepreneur at heart, so he set out to build an enterprise. It’s done well thanks to a “combination of good luck and a lot of teamwork,” Flynn says, although he’s more interested in discovering where Flynn Group goes from here.
“I think the key to success in the restaurant industry for a franchise or any other kind of operator is running your restaurants well, each and every day consistently everywhere,” Flynn says. “And that’s the main hurdle you have to overcome to succeed. It’s not about buying restaurants cheaply or it’s not about building restaurants quickly or it’s not even about your franchisor coming up with the latest great promotion or advertising. All those things matter and have contributed to success. But the thing that we need to get right and focus almost all of our energies on, especially as the franchise operator, is running our restaurants well each and every day and creating consistent, great guest experiences because that’s the heart of the business.”
