Lucrative restaurant deals are hard to come by, but there are still acquisitions to be made and growing franchises will get buyout interest. We spoke to several dealmakers for ideas on takeover targets in the sector. Here are two categories that stand out.
NEW YORK, May 8, 2024 /Mergers & Acquisitions/ -- “It’s been our long-time thesis that there’s a number of emerging brands across each of the major categories that have done really well and taken a lot of share,” says Mike Esposito, a co-managing partner at Franchise Equity Partners and a former Goldman Sachs (NYSE: GS) executive. “When you look at chicken, it has taken a huge amount of share in the last five or six years relative to other concepts. I think the idea is that it’s healthier than burgers or some of these other things.”
“I think certain chicken brands are really attractive — the higher growth ones like Dave’s Hot Chicken, Slim Chickens, and Raising Cane’s. I’m sure they all receive takeover interest frequently. I’m sure they get approached all the time. These would be the some of the most attractive growth investments out there,” he adds.
Los Angeles-based Dave’s Hot Chicken has close to 200 locations and has another 700 in the development pipeline. The company counts Drake and Samuel L. Jackson among its celebrity backers.
Fayetteville, Ark.-based Slim Chickens has over 265 locations and another 1,200 in the pipeline. In 2019, the company received an investment from 10 Point Capital.
Baton Rouge, La.-based Raising Cane’s has over 700 locations and plans to open 90 more by the end of 2024. The chicken finger chain is closely-held by founder and billionaire Todd Graves, who is said to be the richest person in Louisiana.
“The rapid expansion of various chicken-centric culinary brands, such as Houston’s Hot Chicken, which is scaling from 20 to 100 locations, indicates a significant trend in the food industry,” says Greenwich Capital Group Managing Director Andrew Dickow. Houston’s Hot Chicken is headquartered in Henderson, Nev. and received an investment from Savory Fund in 2023.
Let me Buy You a Coffee Franchise
Investors love the coffee sector because of its profitability and populatiry. The days of building large coffeehouses, with kitchens and grills, having to add vents and other equipment, and hiring people to cook are going away. Now coffee shops are opening smaller stores and adding drive-thru’s, which according to Dickow, are more profitable. Also, companies are partnering with real estate developers to build stores to help them scale faster.
“The specialty coffee sector is witnessing a surge in interest from private equity,” says Dickow. “This is exemplified by the emergence of several brands mimicking Dutch Brothers, like Seven Brew, which recently received an
investment from Blackstone (NYSE: BX). Additionally, other similar privately-owned concepts, such as Scooter’s and Clutch Coffee in the Carolinas, are closely following this model and appear to be prime candidates for future investments.” Scooter’s has over 750 stores and plans to reach over 1,000 locations by the end of the year. Clutch Coffee has about 10 locations and is planning on opening another one in South Carolina.
“As these companies continue to grow, they are likely to attract more private equity attention,” adds Dickow.
Reach out to Esposito: contact@fep-us.com
And Dickow: adickow@greenwichgp.com
