Private equity firm acquires Freddy's Frozen Custard & Steakburgers

Dive Brief:

Thompson Street Capital Partners has purchased 400-unit Freddy's Frozen Custard & Steakburgers, according to a press release. Terms of the transactions were not disclosed.
The partnership will allow Freddy's to expand into areas where it is not present and continue its existing growth trajectory going forward, Randy Simon, Freddy's co-founder and CEO, said in the press release. TSCP director Joe St. Geme said it will help the company accelerate franchise development, increase its marketing and technology deployment and enable operational best practices across its system.
The transaction comes at a time when Freddy's ended 2020 with 30 new restaurants, increasing systemwide sales by 21.2% and growing average unit volumes by 6.5%, according to a press release. The company, which operates drive-thrus, also plans to open 50 more restaurants nationally through the end of 2021.

Dive Insight:

Investors are increasingly hungry for restaurants that performed strongly during the pandemic, and Freddy's fits the bill.

During the pandemic, Freddy's invested in innovation and technology that allowed it to roll out a mobile ordering platform that allowed its franchisees and team members to offer curbside delivery and contactless ordering. Customers also increasingly signed up for its loyalty program where it was available, according to a press release.

Prior to the pandemic, Freddy's reported a 14.5% increase in sales, surpassing $500 million in 2019 for the first time in the company’s nearly 20-year history, according to a press release. The company also opened 40 new restaurants that year, including its first Dubai restaurant and nontraditional units in universities and a casino.

So far this year, the company expects to open a dozen restaurants during the first quarter in Tennessee, Georgia and Texas, and has additional franchise opportunities in the Northeast, Upper Midwest, California, Florida, Oregon and Washington and metro areas like Pittsburgh.

More transactions like this one are expected this year, with analysts anticipating an upswing in sales at surviving restaurants with reduced competition in a segment that was previously oversupplied. Zaxby's, for example, attracted the attention of Goldman Sachs, which bought a significant stake in the company last year. In 2020, investor Savory bought Via 313 and Crack Shack last year, while 10 Point Capital invested in Walk-Ons the same year it sold Tropical Smoothie Cafe.