Restaurateurs find a 2nd career as financiers

A growing number of big-name restaurateurs are leveraging their cash flows and business-building know-how to branch into venture financing, finding and funding upstarts even outside the industry.

Dan Cathy, CEO of Chick-fil-A and head of the family that owns the chicken empire, revealed at last month’s Global Restaurant Leadership Conference in Dubai that he’s considered forming a venture capital firm to fund “experiential” retail concepts. The 64-year-old explained that he’s at a stage in his life where his entrepreneurial yearnings are on the upswing, a parallel he saw in the life of his father, Chick-fil-A founder Truett Cathy.

He’d join a list of such established operators as Danny Meyer’s Union Square Hospitality Group, which recently pooled $200 million in private equity to back fast-casual chains and tech firms that serve restaurants.

Roland Dickey relinquished his responsibilities as CEO of Dickey’s Barbecue Pit, the business founded by his grandfather, to take charge of a new holding company, Dickey’s Capital Group. The younger Dickey serves as executive manager of assets, which are estimated at $400 million.

"For us, it seems to be the right next step and the right evolution, and not only so Roland could grow professionally," said his successor as CEO, Laura Rea Dickey, who also happens to be his wife. "He has this strategic view of how to align interests and a really good sense of finance and  investments."

Portfolio additions are expected to deepen the family’s involvement in the foodservice and technology industries. The goal is to add two to three restaurant brands within the next five years, and the company has very specific guidelines for what those additions could be: "Other brands that compliment or could compliment our current business--40 to 120-unit chains that are looking for investment that don’t want to go the PE or public equity route," explains Rea Dickey.

Food Tech Angels is the name of the unconventional financing operation that grew out of chef Jose Andres’ multiconcept operation, ThinkFoodGroup. Now independent, though backed in part by Andres and led by TFG co-founder and partner Rob Wilder, FTA pulls together possible investors to invest “in early stage opportunities at the intersection of food & technology,” the firm explains on its website.

The group is more of a network of possible financiers rather than a standing private-equity fund. FTA makes its money from being one of those investors, not from taking a fee, the company stresses.

Sodexo, the global foodservice management company, formed a $58 million venture capital fund last year to nurture companies in a variety of fields related to the business, including technology, health and smart buildings. Simon Seaton, CEO of the company’s Onshore Energy operation, said Sodexo Ventures is intended to ensure innovation and new options for the concern.

It's not a coincidence that technology is one of the areas where restaurant companies are looking to become significant investors, says Rea Dickey. Consumers' demand for off-premise dining has turned technology into a major area of focus for restaurant operators, immersing them in a field that's still rife with entrepreneurial opportunities.

The trend further blurs the line between the investment world, and private-equity channels in particular, and restaurants, a favorite hunting ground for financiers despite the industry’s current struggles. PE-affiliated firms like Focus Brands, Axum Capital and CapitalSpring are as much restaurant operators as they are investors.

One of the industry’s largest operators is Sun Capital Partners, the PE giant that counts about 21 restaurant brands within its fold.

But the new manifestation all but erases the distinction between operator and financier. The converts are betting there’s as much or more money to be made in moving around money as there is in selling food and beverage.

Some of the concepts funded by USHG’s PE fund, Enlightened Hospitality Investments, could be operations started by USHG itself, according to the Danny Meyer-led parent company. Its current holdings include stakes in Tender Greens, Sweetgreen and Joe Coffee. 

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