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MOD Pizza restaurant

MOD Pizza raises additional $32M in funding round

Fast-casual chain has raised $106 million to date to fund aggressive expansion

MOD Pizza, the Seattle-based fast-casual chain, said Wednesday that it has raised $32 million in a funding round led by its existing private-equity investor, PWP Growth Equity.

PWP, managed by Perella Weinberg Partners, also led a $45 million funding round a year ago for the operator. MOD Pizza has now received $106 million from PWP and other investors. 

The latest round will help fund MOD Pizza’s aggressive growth. The company started the year with 92 locations and plans to finish the year with about 190 units, with 70 of the new locations company owned.

“We’re putting it to work real quickly,” MOD Pizza CEO Scott Svenson said in an interview Wednesday. “It’s going into new stores. We’re continuing to build infrastructure.” 

The chain had 110 locations as of an interview Wednesday, but at MOD’s growth rate the tally changes almost daily.

Private-equity groups and other investors have been pouring money into high-growth, fast-casual chains in recent years. Now many of these investors are adding second and even third funding rounds into the same concepts, helping to fuel growth.

Scott and Ally Svenson founded MOD Pizza in 2008. The chain has quickly become among the biggest in the burgeoning fast-casual pizza sector

The chain is coming off of a strong 2015 in which same-store sales grew 12.4 percent. Same-store sales are “not far off” from that number so far in 2016, Svenson said.  

The latest round of funding from PWP is another sign of the chain’s success. 

“They seem happy,” Svenson said of PWP. “They joined us last spring and are very engaged, great partners.” 

David Ferguson and Chip Baird, co-heads of PWP Growth Equity, continue to sit on MOD’s board of directors. 

“We have enjoyed our partnership with Scott, Ally and the MOD team during the last year and are pleased to expand our investment, helping to support the brand’s continued growth,” Ferguson said in a statement.

“We have been very impressed with the way MOD has executed its aggressive growth plan, and believe the company is well positioned to remain the industry leader in fast-casual pizza,” Baird said in a statement. 

MOD is growing at a breakneck pace in a segment that is itself growing rapidly.

These pizza chains aim to provide diners with quickly made, individual pies in a fast-casual setting. MOD is opening locations in markets across the country, Svenson said, and once the company opens a market it works quickly to build critical mass there. 

For instance, MOD opened its first location in St. Louis on Saturday, and plans to open four more units there over the next four months. 

“We get into a market and build presence as quickly as we can,” Svenson said.

Aggressive growth can lead to problems when chains expand too quickly and the supply of locations for a particular chain outstrips demand for the concept. However, Svenson is well aware of that danger.

“Believe me, we’ve done this several times before. We’re aware of the risks associated with it,” he said, noting that executives routinely ask whether they are growing too fast. 

Svenson said the company monitors its culture and the engagement of its employees. Workers are happy and engaged and have bought into the company culture, he said. That is the clearest sign that growth is at the right pace. 

“I don’t believe right now that we’re moving too quickly,” Svenson said, adding that the chain would slow its growth if it did.

There is some need for MOD to grow quickly. Many of its competitors are adding units rapidly, too, including Blaze Pizza, Pie Five Pizza Co., Project Pie and PizzaRev. They are all well funded.

Svenson said that MOD started franchising three or four years ago partly to be in a position to grow quickly and gain market share in the emerging business. 

“That was a great decision,” he said. “We were very selective. We have a small number of franchise partners. Not only are they good at what they do, they’re raising the bar for us and helping us to be a better operation.”

Yet he also said that the hype surrounding the fast-casual pizza segment is beginning to fade, and top concepts will separate themselves from the pack. 

“The hype that existed two or three years ago is starting to settle,” Svenson said. “People are starting to close stores, retrench and consolidate a little bit. That’s a natural part of the process.

“There will be a winnowing out over time. It’s just a natural part of any market like this.”

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

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