THE INSIDE STORY OF THE FIREHOUSE SUBS $1 BILLION DEAL
Firehouse Subs started with the sale of two hot dogs.
It was opening day Oct. 10, 1994, at the Jacksonville-based sub shop’s San Jose Boulevard slice of strip-mall space in Mandarin.
Firehouse Subs was the dream of firefighter brothers Robin and Chris Sorensen.
Chris was 34 and Robin was 26.
Sales for that store’s first 12 months totaled $347,000.
What a difference 27 years can make.
“We will do close to $1.1 billion in revenue this year,” said Robin Sorensen on Nov. 15. That’s with 1,206 restaurants in 46 states, Puerto Rico and Canada.
The biggest achievement is expected in a month or two when the Sorensens and their partners close on the sale of Firehouse Subs to publicly traded Restaurant Brands International Inc., the Canadian owner of Burger King, Popeyes and Tim Hortons.
For $1 billion. Cash.
The deal with Toronto-based RBI was signed late at night Nov. 14. It was announced to employees, franchisees and the world at 8:30 a.m. Nov. 15.
Sorensen said he was anxious that morning to explain the deal to leadership and his employees.
“It was a highlight of my life,” he said.
“We want to feel like we’ve done right by everyone and I think we’ve done it. That’s what makes me happy.”
Sorensen said Firehouse Subs is his family’s legacy.
“It’s everything we have. I was 26 when we opened Firehouse and I’m 53. It’s half my life,” he said. Chris Sorensen is 61.
“We felt like it was our job to try to make the right decision and put the business first. That is how we have run the business for 27 years.”
Reached at 4 p.m. the day of the announcement, Robin Sorensen was absorbing the events.
“I am emotionally and physically wiped out.”
How it happened
Robin Sorensen said that several years ago, he and his brother decided they would entertain an acquisition “under certain circumstances.”
“It would be a tall order and I wasn’t too sure that we could pull it off.”
He ruled out an initial public offering. “It’s not my personality,” he said, having owned and operated a privately held company for decades.
Firehouse Subs, a quick-service restaurant concept selling “hearty, hot specialty subs featuring steamed meats and cheeses on a toasted sub roll,” had been growing, attracting awards, franchisees, customers and media attention.
As Firehouse grew, the Sorensens hired veteran restaurant operator Don Fox in 2003, promoting him to COO in 2005 and CEO in 2009. Vincent Burchianti joined in 2001 as chief financial officer.
“We have one of the best CEOs in the industry,” Sorensen said.
But the company found it was reaching its capacity with resources.
“We needed somebody with much larger resources than we have,” he said.
That included resources for supply chain efficiencies and digital and social platforms.
Sorensen acknowledged the success to date.
“Taking it from 1 to 1,200 is an amazing ride,” he said.
Not only that, he noted: “Most founders are gone way before 1,200 restaurants.”
The Sorensens own the supermajority of the stock. There are a few other investors, including partner Stephen Joost.
Dozens of restaurant groups and investors showed interest in buying Firehouse Subs over the years, so the Sorensens knew there were opportunities.
They hired TD Securities of Toronto to identify prospective buyers.
Sorensen said Firehouse has banked with TD Bank since the financial organization came to Jacksonville when it bought Mercantile Bank in 2010.
Cindy Stover, the company’s banker since the 1990s, was with Mercantile and then TD.
Through Stover, now TD Bank North Florida market president, the Sorensens developed a relationship with TD Securities.
The Sorensens went through the list of companies that reached out with interest and narrowed it “to who we thought had the right stuff.”
RBI wasn’t on the list. TD Securities suggested it.
“We went through a group of companies and went through the process to see who stood out and they stood out from the beginning,” Sorensen said.
Sorensen said RBI CEO Jose Cil had submitted a growth plan when he became the company’s leader in 2019. “And we fit right in with that.”
“They were well aware of us and had been tracking us and following us,” Sorensen said.
TD Securities represented Firehouse and communicated with the brands.
It took two to three months, not counting the time leading up to it “and the long time thinking of it.”
Then came the time to act.
“Chris and I didn’t know this was happening until the past five to six weeks,” Sorensen said.
It was then they brought Fox into the decision.
“We needed our CEO Don Fox to believe in it and be the biggest cheerleader,” Sorensen said.
They all spent time with Cil the past month to six weeks.
And the $1 billion?
TD Securities priced the transaction at $1 billion, Sorensen said, “a multiple based on many factors.”
“We didn’t ask for that number. We talked to a handful of companies. We had them bring forth what they were willing to pay.”
Language went back and forth for months. The deal was set to be announced Nov. 15.
Sorensen was the last of the shareholders to sign off electronically Nov. 14, a few minutes before midnight.
“It doesn’t sound very sexy, but I signed it at my house and the other shareholders had signed it a little bit earlier,” he said.
“I tried to go to sleep and it wasn’t easy to do. I got to the office early this morning.”
The Sorensens had their terms in pursuing and accepting a deal.
“If it didn’t work along the way, Chris and I weren’t going to do it,” Robin Sorensen said.
First, the founders wanted to leave the brand in a strong financial and operational shape.
“If we are doing the best we’ve ever done, that would be a good time,” he said. “It’s important to us that the brand is healthy.”
Second, the deal would not be dollar-driven. Rather, it would depend on meeting the requirements.
Those included keeping the local employees, retaining the Jacksonville headquarters and carrying on the mission of the nonprofit Firehouse Subs Public Safety Foundation to support public safety organizations.
Third, the buyer needed to have the resources to grow Firehouse.
“We met with a lot of good companies, but not everyone was necessarily aligned,” Sorensen said.
It has 28,000 restaurants in 100 countries. “All they see is growth opportunity,” Sorensen said. “They see the white space they can fill.”
That includes international growth for Firehouse Subs.
Fox remains CEO and Burchianti stays as CFO. Robin Sorensen will chair the foundation, which has granted $62.5 million in support, and Chris Sorensen will serve on its board.
In addition to TD Securities, Firehouse was advised by the Latham & Watkins law firm, said the news release about the sale.
For RBI, BofA Securities Inc. and J.P. Morgan Securities LLC were financial advisers and Paul, Weiss, Rifkind, Wharton & Garrison were legal advisers.
Fox, Robin Sorensen and Cil led the morning announcement Nov. 15 at the Firehouse Subs headquarters in Flagler Center in South Jacksonville. Chris Sorensen attended as well.
Fox said he was asleep when he learned by email about midnight that the deal was done.
He was able to sleep a little, but his mind was on the 8:30 a.m. staff meeting.
“There was a lot to do to make our announcements this morning,” Fox said about 3:30 p.m. Nov. 15.
He said staff came to headquarters. “We had an excellent two hours with them,” he said.
“We were prepped and ready, but we also were prepared to pull it back if it didn’t happen on schedule, but thankfully it all did.”
Fox and Robin Sorensen said about 150 staff attended in person and 30-50 more logged in through Zoom. The RBI news release was sent out simultaneously, as were notices to affiliates, like vendors.
“We have some close relationships with so many staff members,” Sorensen said.
“We had a lot of tears today, but as we went through the morning, we really feel like we made the right decision.”
Sorensen said he introduced Cil to the staff.
“He was there for us to go through why they made the decision, why they were investing in Firehouse and the resources they can bring,” he said.
Cil took questions and the staff broke into a smaller leadership group. That was followed by media interviews and tours.
“It was a busy morning,” Sorensen said.
Assuming the deal closes after conditions and regulatory approvals the next month or two, Fox said he is preparing “to stay on and lead the company through this time of what we anticipate to be great growth.”
He leads the headquarters staff of about 180, of which about 150 are in Jacksonville and the rest outside the market.
The company owns 35 restaurants in Northeast Florida, where they employ about 700 workers.
“We have 850-880 that are directly employed by us,” Fox said.
There are more than 450 franchises in the system.
He cited RBI’s presence worldwide, which “gives us the opportunity to expand faster than we ever would have on our own.”
Fox, 63, said he is energized and “really looking forward to leading this team to new heights.”
He also will promote Firehouse’s role in Jacksonville.
“We are the largest restaurant brand based here. This year we crossed the billion-dollar mark in system sales. I hope the community of Jacksonville can look at that with pride,” he said.
“Often, people are not aware of the size of Firehouse,” Fox said.
“We are an international brand and we are proud to call Jacksonville home.”
Fox said customers will not see any change that detracts from Firehouse Subs’ commitment to quality, service and community.
“It will only get stronger because of our commitment to resources,” he said.
Fox invites those who question it to visit.
“Keep coming and testing us,” he said. “I appreciate the continued investigatory interest.”
Sorensen said the only negative of the public announcement of a $1 billion sale was that “everyone got to see the number.”
He said the family always has been private, as was the company. “But it just kind of is what it is.”
Sorensen said he, his wife and his brother will continue focusing on philanthropy.
He said he will take time to find where they can help.
“We don’t want to just write a check,” he said. “We want to find where somebody or some group is underserved.”
Camp Sorensen is an example. First Baptist Church Jacksonville asked Robin Sorensen and his wife, Tabitha, if they wanted to buy the 130-acre First Baptist Church Jacksonville Hilliard Retreat Center.
The couple paid almost $1 million to fund the purchase and gave the property to the Florida Sheriffs Youth Ranches.
The couple also is helping to raise money for the capital campaign to renovate and open it for youth camping programs in Northeast Florida.
Sorensen said he will continue his investments in other businesses and some restaurants.
He and his brother also talk about restaurant concepts, although there is a line.
“I don’t want to grow a big chain again.”
Then again, he might take another turn.
“I may go get a job tending bar somewhere. I like being in the environment and talking to people. Maybe I’ll see who is hiring.”
Regardless of what he does, “I’m still Firehouse’s No. 1 fan and always will be.”
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