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Financing

Muscle Maker Grill wants to raise $20 million in ‘mini IPO’

After SEC qualification, the fast-casual health food chain is selling stock to raise cash for new locations and marketing.

Muscle Maker Grill on Monday said it has received a qualification from federal securities regulators to go ahead with its $19.9 million initial public offering.

The Houston-based fast-casual health food chain plans to sell 4.2 million shares at $4.75 per share to open new company locations and fund a new marketing campaign. The company also suggested it could fund an acquisition.

The pricing suggests a valuation of nearly $69 million.

Muscle Maker is raising the funds as a Regulation A+ IPO. The offerings enable smaller companies to raise money from customers or other retail investors, and are often known as mini IPOs because of their size. Fatburger and Ponderosa owner Fat Brands Inc. went public this way in October. The movie theater-restaurant hybrid iPic Entertainment filed its mini IPO this month.

Muscle Maker plans to list its shares on the New York Stock Exchange’s American exchange.

Rod Silva founded Muscle Maker in 1995. The company is mostly franchised, with 53 locations in 14 states. The chain is targeting military bases for much of its expansion. The chain expects to add another 17 locations by the end of March of next year.

The company reported a $3.1 million loss in 2016, and those losses widened in the first six months of 2017, when Muscle Maker reported a $5.2 million loss on $3.9 million in revenues.

The company had a working capital deficit of just more than $9 million as of June 30.

Muscle Maker’s risk factors include what is known as a “going concern” warning, meaning that auditors believe there is doubt about the company’s future, based on its financials.

“If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business even if this offering is successful,” the filing says.

Still, the company believes that it can grow based on consumer demand for healthy food. The company also believes it could generate sales through delivery, consumer packaged goods, food trucks, catering, grab-and-go operations and inside stadiums, according to a presentation the company gave last week. Muscle Maker is also targeting second-generation sites made available by restaurant closures for new units.

TriPoint Global Equities, through its online division Banq, is the sole book runner for Muscle Maker’s offering.

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