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TASTY BRANDS, LP

SUPPLEMENT DATED JUNE 22, 2018

TO THE CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

DATED JANUARY 1, 2018

 

This document supplements, and should be read in conjunction with, the Confidential Private Placement Memorandum of Tasty Brands, LP dated January 1, 2018. Unless otherwise defined in this supplement, capitalized terms used in this supplement shall have the same meanings as set forth in the prospectus. 

The purpose of this supplement is to disclose: 

  • an update on the status of our private offering; and 

  • an update regarding our acquisition of 64 Burger King franchises. 

 

STATUS OF OUR OFFERING

As of June 22, 2018, we have sold a total of 631,401.36 shares of our limited partnership interests for gross proceeds of $15,366,000. 

  

ACQUISITION OF BURGER KING FRANCHISES 

On June 22, 2018, Tasty King, LLC, a portfolio company subsidiary of Tasty Brands, LP that was established to operate as a Burger King franchisee, completed its first acquisition from an unaffiliated third party, including a total of 64 Burger King restaurants located in Iowa, Kansas and Missouri (the “Burger King Restaurants”).  The purchase price for the Burger King Restaurants was approximately $34 million, plus closing and transaction costs. We funded the acquisition of the Burger King Restaurants with a combination of debt financing and the net proceeds from our offering, as discussed in greater detail below. 

 

THE BURGER KING RESTAURANTS

Burger King, founded in 1954, is currently the number two fast food hamburger chain globally, with over 15,000 restaurants worldwide that serve an average of 11 million customers each day.  Burger King restaurants feature its signature flame-broiled sandwich, the Whopper, which is one of the best-known products in the fast food industry.  The Burger King Restaurants that we acquired are primarily free-standing with the exception of a few stores in Des Moines, IA, that are located in-line or at the end-cap of strip malls.  All of the Burger King Restaurants are located on premises leased from unaffiliated third parties, including, in some cases, Burger King Corporation (“BKC”).  The map below identifies the locations of the Burger King Restaurants:

The Burger King Restaurants will be independently-owned and operated by Tasty Brands, LP and our affiliates.  We and our affiliates have entered into a franchise operating agreement with BKC for each store. As part of our franchise arrangement, we are required to pay to BKC a one-time franchise fee as well as a royalty fee equal to approximately 4.5% of our gross sales for the use of the Burger King system and the Burger King trademarks.  We are also required to pay an additional 4% of our gross revenues to Burger King for advertising.  Under our franchise agreement, our product offerings will be mandated by BKC and must be consistent at all Burger King locations.  However, as an independent franchisee, we are able to set our own pricing, with the exception of pricing for national promotions, which are set by BKC.  The chart below reflects the percentage share of the total dollar revenue for each product category for the Burger King Restaurants (all percentages are as of October 2017):

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THE ACQUISITION

We acquired the Burger King Restaurants through our affiliated entity, Tasty King, LLC.  The purchase price for the restaurants was $34 million, subject to certain adjustments.  We financed the acquisition through a combination of outside debt financing and the proceeds of our offering.  Approximately half of the purchase price, or $17 million, was financed through a senior fixed rate loan made to Tasty King, LLC and secured by all of the assets of the Burger King Restaurants.  This senior fixed-rate loan is for a term of five years and bears interest at the rate of approximately 6% per annum.  In addition, we made an equity contribution to Tasty King, LLC of approximately $21 million, which consisted of approximately $13 million from the proceeds of our offering and proceeds from an $8 million term loan from an unaffiliated third party.  The term loan is for a period of three years and is secured by all of our assets, including our interest in Tasty King, LLC.   

In conjunction with the acquisition of the Burger King Restaurants, Tasty King has entered into an Area Development and Remodel Agreement with BKC.  Under this agreement, BKC is providing incentives to Tasty King to develop within its designated territory as well as remodel older units to comply with the current image requirements for Burger King.  We anticipate that these remodel investments should drive sales growth and generate an attractive return on investment.  As a ‘strategic partner’ for BKC, Tasty King also anticipates having the opportunity to acquire smaller operators within the territory as well as have the support of BKC to pursue acquisition opportunities in adjacent markets.

 

ADDITIONAL INFORMATION REGARDING THE BURGER KING RESTAURANTS

Set forth below is a list of the Burger King Restaurants by location.

TASTY KING, LLC ASSET LISTING

The following table shows, by region, (i) the gross revenues of the Burger King Restaurants for the year ended December 31, 2017, and (ii) their respective earnings before interest, taxes, depreciation and amortization (EBITDA) for the same period.

 Note: 2017 revenue and adjusted store-level EBITDA as presented in quality of earnings report completed by CohnReznick.

Note: 2017 revenue and adjusted store-level EBITDA as presented in quality of earnings report completed by CohnReznick.