Freddy’s Frozen Custard and Steakburgers is exploring a sale, according to a report by the news service Reuters on Wednesday, putting in play yet another high-growth name among franchise restaurant chains.
According to Reuters, Freddy’s has hired the investment bank William Blair that could launch a sale process at a valuation of $1 billion.
Such a deal would add to the growing number of franchised brands fetching strong multiples in a market that is otherwise unexcited by the restaurant business. This week, the private-equity firm Blackstone took a majority stake in the sandwich chain Jersey Mike’s at a valuation of $8 billion. Earlier in the year, the same firm snapped up Tropical Smoothie at $2 billion.
“The focus is on asset-light franchisors and businesses that have very good growth metrics,” Josh Benn, global head of the investment banking practice at Kroll, said at the Restaurant Finance and Development Conference last week.
Freddy’s certainly fits the bill. It is one of the stronger performing fast-casual brands in the U.S., certainly among the burger names.
System sales have grown an average of 14.3% the past five years, according to Restaurant Business sister company Technomic, including 14.5% last year. They neared $1 billion in system sales from more than 500 restaurants.
Franchisees operate about 94% of the locations.
The chain was founded in Kansas by Bill and Randy Simon with friend Scott Redler. The company was sold in 2021 to the private-equity firm Thompson Street Capital Partners. Thompson Street apparently believes the market is strong enough to warrant an exit from that investment in about four years.
According to Reuters, Freddy’s could fetch a valuation of 20 times earnings before interest, taxes, depreciation and amortization.
Freddy’s did not respond to requests for comment.
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