Association with a celebrity chef can bring considerable notoriety to a high-end independent startup. A similar cachet for small chains in growth mode is increasingly coming from a handful of star investors.
Not coincidentally, those backers are often operators themselves, usually with a history of successful chain building to their credit. The assumption on the part of other prospective investors and development partners is that the individuals know what is likely to succeed in today’s market. They’ve also mastered the hows. The affiliation tags a concept as one to watch, if not ride.
The arrangement can also yield unique benefits for the investors, too, notes Michael Whiteman, a principal of the Baum + Whiteman restaurant consulting firm. "They often purchase stocks in these young companies at very steep discounts--even below that paid by earlier friends-and-family investors," he explained. "Their justification for the price cut is that they add a visible name to the venture. While minimizing their risks, of course."
Here’s a look at some of those celebrity investors and their recent choices of concepts to nurture.
Greg Dollarhyde: Blaze Fast-Fire’d Pizza
Fellow Blaze investor LeBron James might have better ball-handling skills, but Dollarhyde has the superstar beat on restaurant successes. He’s had a hand in rolling out such fast-casual standouts as Zoes Kitchen and Veggie Grill, and helped to develop and define the segment with his stewardship of Baja Fresh before the pioneering brand lost its way.
Blaze did not reveal how much money had been put into the concept by Dollarhyde and the chain veteran’s usual investment proxy, Brentwood Associates. But it did specify that the dual investments by Brentwood and Dollarhyde Investment Group IV did not add up to a controlling interest. Still, the infusions were sufficient to get Dollarhyde a seat on Blaze’s board.
The chain’s CEO remains Jim Mizes, a veteran of the Taco Bell system. Dollarhyde has also been a part of that chain.
He or Brentwood also hold stakes in Lazy Dog Cafe, a full-service venture; Pacific Catch, a seafood fast casual; and Starbird Chicken, an upstart fast casual that specializes in chicken sandwiches.
Danny Meyer: Salt & Straw, Joe Coffee, Tender Greens
The celebrated fine-dining guru has shown considerable prowess in building a fast-casual growth chain as well. Shake Shack, the first limited-service concept nurtured by Meyer’s Union Square Hospitality Group (it started as a hot dog cart), sparked one of the most successful public stock offerings in the history of the restaurant business.
Now Meyer and USHG have plunked money into three other limited-service concepts, all started by other entrepreneurs.
Salt & Straw is a West Coast concept that specializes in premium ice cream, sold via the chain’s shops in California and Oregon and wholesaled to other retail operations, including USHG’s Daily Provisions food shop.
Joe Coffee’s signature product is also available at Daily Provisions. The company also runs a handful of New York City coffee shops specializing in super-premium java.
Tender Greens is Meyer’s longest-standing alternative restaurant investment (he’s also a stockholder of several tech companies, including OpenTable). The West Coast chain specializes in farm-to-fork fare grown near its stores. The sources include Scarborough Farms, another investor in the business.
Don Thompson: PizzaRev, HalfSmoke, Drink
Thompson, the CEO of McDonald’s before current job-holder Steve Easterbrook, has started a venture capital firm with his wife, Liz. Their stated aim is to foster the growth of stable companies that can help stabilize communities, including their hometown neighborhood of Cleveland Avenue, in Chicago. They’ve taken the name of that street as the moniker for their company.
Its biggest holding to date is 200-unit PizzaRev. Thompson bought a controlling interest in the fast-casual pizza concept, a direct competitor of Blaze, in May for an undisclosed amount.
His other holdings include HalfSmoke, a fledgling chain in the Washington, D.C., area. It specializes in half-smokes, a local variety of brat-like sausages.
Drink is a nonalcoholic beverage bar located inside American Eagle Outfitters clothing stores.
Shelly Sun: Capriotti’s Sandwich Shop
Sun hasn’t run restaurants before, but she’s no stranger to the franchising dynamic of the business. She’s the founder of BrightStar, the franchisor of 300 healthcare-staffing operations that average over $1 million in sales. Sun is also chairman of the International Franchise Association and an active participant in the efforts to keep the current definition of “joint employer.”
Her investment in the 100-store Capriotti’s chain was not revealed. But she’s now on the quick-service chain’s board.
Some of the more senior members of the team smile at the junior staff who are excited to uncover an interesting trend in “eatertainment” or the latest single-ingredient concept. We try not to be condescending when we suggest they do some research by looking at past issues of Restaurant Business or old Technomic top chain reports before calling it the next big thing.