Dive Brief:
- Franchise Equity Partners has acquired a majority stake in 7 Crew, the second-largest franchisee of 7 Brew Drive-Thru Coffee, according to a Tuesday press release.
- The terms of the deal were not disclosed, but FEP will continue to 7 Crew’s existing agreement — the franchisee operates about 50 7 Brews and plans to open up to 200 more over the next five years.
- 7 Brew has experienced explosive growth in recent years, with its store count rising from 14 in 2021 to more than 460 this year, according to the press release. The chain’s franchise disclosure document shows the majority of this growth has come from franchisees.
Dive Insight:
7 Crew’s development under FEP, a private equity firm focusing on franchising, will focus on Texas, Florida, Oklahoma and New Mexico.
The franchisee “combines scale, prime territory, and a proven development engine with an experienced leadership team, providing a model for accelerated growth,” the press release said.
Kendra Burris, CEO of 7 Crew, said FEP brings operational expertise and a long-term vision to the deal. The operator’s existing investors — Masked Rider Capital, an investment firm based in west Texas, and Red Sky Holdings, a real estate development group — will retain significant stakes in the operator, per the press release.
7 Brew, which is partially backed by Blackstone, boasts strong unit economics, according to its FDD. The chain’s mature franchised units have an average unit volume of roughly $2 million. The stores are typically built using modular construction and average about 510 square feet, which minimizes construction costs and real estate needs.
Much of the restaurant sector’s M&A this year has been driven by private equity. Freddy’s Frozen Custard & Steakburgers was acquired by Rhône earlier this month. Qdoba secured a $527 million fund backed by Apollo in August. Philz Coffee was purchased for an undisclosed sum by Freeman Spogli. Levine Leichtman Capital Partners bought Shipley Donuts in July. Roark acquired a majority stake in Dave’s Hot Chicken in June. Those moves are in line with predictions by industry experts, who told Restaurant Dive at the start of the year that acquisition activity, particularly by private actors, was likely to pick up in the restaurant industry in 2025.
But the 7 Crew deal is somewhat unique. While franchisees have been involved in acquiring brands — in Friendly’s case — or substantial parts of brands — in Hooters’ case — there have been few high-profile, publicly announced instances of major acquisitions of franchisees this year. FEP’s investment in 7 Crew could signal greater investor interest in operators, particularly ones at high-growth brands with strong unit economics.
