Report: Smashburger hires firms to seek growth capital

Report: Smashburger hires firms to seek growth capital

Move could indicate an IPO within the next two years, The Deal Pipeline says

Smashburger has hired North Point Advisors LLC and Bank of America Merrill Lynch to look for sources of growth capital, according to a report Wednesday.

Citing unnamed sources, a report in The Deal Pipeline said the fast-casual burger operator was exploring means to grow, including the possible sale of a majority stake, in preparation for an eventual initial public offering.

The report predicted that the Denver-based chain will go public within two years.

Smashburger officials declined to comment on the report, and North Point Advisors did not respond to queries by press time.

The 220-unit Smashburger chain expects to reach 250 locations before the end of the calendar year. In June, it closed on a $35 million round of financing with Golub Capital to fund ongoing growth.

At the time, Smashburger chief executive Dave Prokupek told Nation’s Restaurant News that an IPO could be on the horizon for the chain “down the road,” but not this year.

Prokupek pointed to restaurant companies like Broomfield, Colo.-based Noodles & Company, which went public in June after reaching more than 300 locations. “There’s a certain size in the business that makes sense,” Prokupek said.

Smashburger recorded U.S. systemwide same-store sales of $162 million in fiscal 2012, a 40-percent increase in same-store sales over the prior year. It ended the year with 186 U.S. units, according to Nation’s Restaurant News’ annual Top 200 census.

Prokupek told USA Today earlier this month that the chain could grow to 1,000 units globally with sales of $1 billion within five years.

However, Smashburger continues to trail rival Five Guys Burgers and Fries, which surpassed $1 billion in sales in fiscal 2012, with 1,105 domestic locations. Lorton, Va.-based parent company Five Guys Enterprises LLC is also being watched as a possible IPO candidate, according to The Deal Pipeline report.

Five Guys, however, leans more heavily toward franchise growth. More than 75 percent of the chain is franchise operated, while Smashburger is aiming more for a mix of about 60 percent company owned and 40 percent franchised.

Earlier this month, Smashburger said it had entered into an agreement to acquire a 75-percent stake in 13 restaurants operated by franchisee Scott Gillman of Mascott Corp. in New Jersey, a move that company officials said would help accelerate corporate growth along the East Coast.

Prokupek said  in a statement: “New Jersey and the entire East Coast markets are very attractive to us from a corporate and franchise perspective, and we believe there is considerable opportunity to expand our footprint here over time.”

Meanwhile, the company also announced the addition of five new franchise partners who are planning to add 19 units in Florida, South Carolina, Utah, Colorado and California.

The new franchisees include:

• David Walker and Kerry Nohle of Sizzle Adventures, who are planning four units in Northern Florida. The partners are former franchisees of Tropical Smoothie, Subway and Marco’s Pizza.

• Josh Snyder of Low Country Burgers, a Moe’s Southwest Grill franchisee, is planning three Smashburger units in the Charlston, S.C., area.

• Mark and Chris Beck-McKay of McKay Management are planning to open six restaurants in Salt Lake City over the next few years. Chris Beck-McKay is a former McDonald’s franchisee.

• Lucas and Allyson Farnham of Better Burger Builders have committed to three units in the Colorado Springs, Colo., area. The couple also operates restaurants under the Black Bear Diner brand.

• Father-and-son team Ron and Ryan Hunter are planning to open three restaurants in Ventura County, Calif., north of Los Angeles.

In addition to domestic growth, Smashburger has begun moving overseas, with growth planned in Canada, South America, the United Kingdom and Southeast Asia.

Smashburger was founded in 2007 by Quiznos co-founder Rick Schaden. The concept is owned by Consumer Capital Partners, Schaden’s private-equity firm, which is also growing the fast-casual-pizza concept Live Basil Pizza, as well as the full-service Tom’s Urban 24 brand, under the Consumer Concept Group entity.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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