The concept incubation company The McHenry Group opened its hot chicken concept, called Dirty Bird, at a Provo, Utah food hall in January of last year. It generated investor attention within a few months.
This week that attention became official with the sale of a majority stake to Wags Capital, which will invest a total of $20 million to expand the concept. It’s the type of risky industry investment that seemed like a thing of the past not that long ago.
It suggests that restaurants are once again attracting early-stage growth capital after the pandemic undermined investor confidence and wrecked valuations. It also suggests that growth chain investments have clearly returned.
Still, it’s one thing to be successful inside a food hall. It’s another to operate a chain of standalone locations. Yet both the investor and the concept’s creator are confident in Dirty Bird and its future and already have deals in place for additional locations.
“Look, obviously this is not my first rodeo,” Wags Capital CEO Aaron Wagner said in an interview. “We’ve taken a handful of other brands to over 50 locations. This just kind of fits the formula, so I’m excited about it.”
Wagner is a football player turned investor, having played for several years in the Canadian Football League.
He began investing passively in the food and beverage space about six years ago. Wags has invested in concepts like Everbowl and Crumbl Cookies, for instance. Wags’ concepts currently have 100 locations under development.
Wagner takes issue with the idea that restaurant investing is risky.
“What I learned from getting more involved on the operations side is that for operators that have business acumen and aren’t just artists and restaurateurs, it’s not that difficult,” Wagner said. “The risk profile doesn’t match what the reputation is.
“There’s just a low barrier to entry for the restaurant industry. People with a good cupcake recipe can open a cupcake shop overnight. But they’ll be out of business before they know it. People who know what they’re doing can do it very well.”
That’s where Dirty Bird Fried Chxx comes in. Wagner is making a big bet on the McHenry Group, founded by the restaurateur Michael McHenry. The group focuses on concept creation, works to build those concepts to three to five units and then finds a partner to take it further.
Dirty Bird was created with growth in mind. Or should I say scale.
“We only know scale,” McHenry said. “When we build ops and build supply chain, we build for scale. We only build from the ground up with the intent to scale.”
Dirty Bird was created with a simple menu. It has four fried chicken sandwiches, plus chicken tenders, along with four sides. The menu was inspired by Nashville hot chicken, whose popularity has taken off in recent years as consumer demand for spicier food has taken off and big chains like KFC give the idea some attention.
The concept was able to open in a food hall near Brigham Young University. “Within six weeks of opening the pandemic hit and everything shut down,” McHenry said.
Dirty Bird still “opened gangbusters” that January and when the shutdown came it didn’t close. “The other five tenants closed within weeks,” McHenry said. “We were operating solely within the food hall for eight months.”
Revenue quadrupled. “We’re at stride,” McHenry said. ‘We have proof of concept and viability and are starting to resonate.”
Wagner—who played football at BYU—was interested in the concept from an early stage. He sees the possibility with the simple menu.
Under the deal, Wags will invest $20 million in the brand’s growth over the next 12 to 14 months. That includes the acquisition price, which is undisclosed.
The concept is already gunning for more locations. Its first standalone location is set to open Sept. 10 in Ogden, Utah. The company has seven leases signed and is negotiating with “another dozen,” all of which are described as “AAA retail locations.”
Most of those sites are standalone drive-thru locations though some are inline sites or endcaps.
And while the concept has not yet been tested at a standalone site, its success at a food hall also opens other doors—like sports stadiums. “We have confidence we can scale the brand down to accommodate those locations,” Wagner said.