History is littered with chains and menu subsegments that grew too quickly and then crashed and burned. Some have learned from their overzealous expansion (Boston Market, Krispy Kreme). And some have not (think froyo and cupcakes).
It’s not just restaurants. A few years ago, the Kauffman Foundation studied the brands that were on Inc. magazine’s list of fastest-growing companies five to eight years prior. About two-thirds of them had gone out of business, downsized or been sold in an unfavorable deal. Yet we keep writing about these fast growers in magazines and celebrating them with awards.
Why? Because fireworks, even metaphorical ones, are awesome. It’s fascinating to ID a chain or idea that came out of nowhere and is suddenly everywhere, and then watch as competitors pop up and fight for territory. Many of them fizzle out. But there’s often that one chain left standing because it’s done its homework on the market and its consumers, created a product with enduring appeal, tapped experienced leaders and managed solid unit economics.
Our cover story in the Q4/2017 issue of Fast (a magazine from the editors of Restaurant Business and Technomic), private-equity investors tell what they’re looking for in a chain. Some of them may seek fireworks; to get in early and sell before the explosion. But most want a longer-term investment—the ones that are still standing.