Acquisition

On May 30, 2012, the Company completed the acquisition of 278 restaurants from BKC for a purchase price consisting of (i) a 28.9% equity ownership interest in the Company, (ii) $3.8 million for cash on hand and inventory at the acquired restaurants and (iii) $9.4 million of franchise fees and $3.6 million for BKC’s assignment of its right of first refusal on franchisee restaurant transfers in 20 states ("ROFR") pursuant to an operating agreement dated May 30, 2012 (the "operating agreement") with BKC entered into at closing (the "acquisition"). The ROFR is payable in quarterly payments over five years and the first quarterly payment of $0.2 million was made at closing. The Company also entered into new franchise agreements pursuant to the purchase and operating agreements and entered into new leases with BKC for all of the acquired restaurants, including leases for 81 restaurants owned in fee by BKC and subleases for 197 restaurants under terms substantially the same as BKC’s underlying leases for those properties. Pursuant to the operating agreement, the Company also agreed to remodel 455 Burger King restaurants to BKC’s 20/20 restaurant image.

The Company believes the acquisition created a strategic opportunity to add a significant number of Burger King restaurants in areas that are either in or adjacent to the Company's pre-existing restaurant base. In addition, the acquisition allowed the Company to leverage its investment in restaurant-level systems and processes and operational oversight. The acquisition is accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” The aggregate purchase price was $74.5 million as follows:



Equity consideration - Issuance of 100 shares of Series A Convertible Preferred Stock	$	57,711
Cash purchase price	16,826
Total consideration	$	74,537

The total cash consideration paid at closing, net of cash acquired, is reconciled as follows:



Cash purchase price	$	16,826
Less: Cash acquired	(417		)
Less: additional consideration accrued but not paid	(4,274		)
Net cash paid for the acquisition	$	12,135

The value of the Series A Convertible Preferred Stock ("Preferred Stock") was based on approximately 9.4 million shares of common stock, the number of common shares the preferred stock would be convertible into at the stock price of $6.13 per share on the closing date of the acquisition. See Note 12—Preferred Stock for further information.

The unaudited proforma results of operations included in the following table are not necessarily indicative of the results that would have occurred had the acquisition been consummated at the beginning of the period presented, nor are they necessarily indicative of any future consolidated operating results.



	Pro forma
	Three months ended
	April 1, 2012
Restaurant sales	$	158,888
Net loss from continuing operations	$	(7,458	)
Net loss per share from continuing operations, basic and diluted	$	(0.34	)

This pro forma financial information does not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition or any integration costs we may incur related to the acquisition.