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The restaurant IPO market shows signs of thawing

Joe & the Juice and Focus Brands are reportedly considering IPOs, which would be the first in three years, says RB’s The Bottom Line.
Photograph by Jonathan Maze

The Bottom Line

Last week, Bloomberg reported that Joe & the Juice and its private-equity sponsors are talking about an initial public offering, perhaps sometime next year.

The publication soon reported another company considering the same thing: Focus Brands, the owner of Cinnabon, Auntie Anne’s and now Jamba Juice. Bloomberg said that the Roark Capital-owned brand had been going so far as to talk with investment bankers.

All of which could suggest that the IPO market, at least the traditional IPO market, is finally thawing after a three-year freeze.

To be sure, none of this means anything until someone actually files a registration statement, and even that doesn’t mean the company will follow through.

Neither of these reports suggest much beyond the exploration stage. And internal discussions happen all the time—I’d guess that several restaurant chains are currently having internal discussions about an IPO as a potential exit. 

Indeed, at least part of me wonders whether the reports are indications that insiders at these firms are considering various exit strategies, and that the reports themselves could be a signal to the market that the brands are available for the right price.

That would not be close to the first time such a thing has happened. Companies sometimes go so far as to file registration statements before selling themselves. Last year, the British fast-casual chain Pret A Manger was planning a U.S. IPO but ultimately sold to JAB Holding.

Then there was Jimmy John’s non-IPO in 2015, when it backed off an offering at the last minute and ultimately sold to Roark Capital.

And this isn’t even the first time that Focus Brands has been the subject of IPO reports. In 2013, the company was rumored to be considering an offering. It made no such step.

Still, the reports suggest that sponsors consider an IPO to be an option, something that’s been relatively rare in the restaurant space of late. It’s been more than three years since the last restaurant chain went public in a traditional sense—companies such as Fat Brands have gone public through Regulation A+ IPOs, while others such as J. Alexander’s have been spun off.

As we noted earlier this week, the fast-casual salad and bowls chain Sweetgreen is putting the finishing touches on a private fundraising effort that would give it a $1 billion valuation. Sweetgreen would have generated a flurry of interest by public investors just a couple of years ago.

Companies that went public between 2013 and 2015 frequently received warm welcomes on Wall Street—Noodles & Co., Zoes Kitchen, Potbelly, Shake Shack and Habit Restaurants all saw their prices more than double on their first day of trading.

But many of these companies have lost favor with investors in the years since. Fogo de Chao, which went public in 2015, went private earlier this year. Zoes Kitchen is following suit. Poor performances by chains such as Noodles & Co. and Potbelly have also seemed to sour public equity investors on restaurant IPOs, while discouraging executives from taking the IPO step.

That said, there have certainly been plenty of winners, including Dave & Buster’s and Wingstop.

That companies such as Joe & the Juice, which operates more than 60 locations in the U.S. and nearly 300 globally, are considering an offering suggests that sponsors and executives are at least considering the market.

Joe includes the private-equity firm General Atlantic among its sponsors. General Atlantic would not comment for this article.

As for Focus, one wonders whether Roark is looking for an exit. The company, which owns Carvel, McAlister’s Deli, Moe’s Southwest Grill and Schlotzsky’s in addition to the aforementioned brands, has been part of Roark for a long time. And Roark appears to be working on another multibranded company in Inspire Brands.

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