Andrew Smith thinks this is a perfect time to be investing in restaurant chains.
The managing director of the Salt Lake City investment fund Savory argues that concepts that proved their worth in the past few months could be poised to flourish in a post-pandemic market—which is precisely why Savory made a control investment in the Southern California-based chicken concept Crack Shack.
“This is an impeccable time to be doing this,” Smith said in an interview. “People want to get out of the home, go to a restaurant, sit across the table from someone and have a meal and break bread. They want to have that experience again.
“We’re betting heavily on experiential dining. We’re in the driver’s seat to bring options like that.”
Crack Shack operates six units in Southern California and in Las Vegas, where it was founded by Michael Rosen, the founder of Juniper and Ivy, along with former Top Chef winner Richard Blais.
Rosen will remain CEO, and Savory has provided what Smith said is a “substantial contribution to the business.” “It is well-funded for growth over the next five years,” he said.
Crack Shack represents the first major investment by Savory since the $90 million fund was created by the private equity firm Mercato Partners. The concept will join Savory’s current portfolio, including Mo’Bettahs, R&R BBQ and Swig.
All of those concepts have recovered from early-recession problems and have seen their same-store sales increase for the past four-plus months. Smith said that those brands have 30 locations under construction and are signing more leases.
That gives the fund confidence that it can grow a brand like Crack Shack, which has likewise thrived in recent months, Smith said. “The store level economics are impeccable,” he said. “The food quality is impeccable. They’ve done an incredible job in the industry even during the pandemic.”
The deal gives Savory a brand in the white-hot chicken market, one populated by the fast-growing Chick-fil-A. “The chicken category is hot, and before the pandemic it was hot,” Smith said. “It’s time for a better chicken concept to prevail.”
But that heat attracts competitors, and there are loads of them, all looking to take advantage of that market, some of which are big-name concepts like Popeyes with popular offerings.
Yet Crack Shack is fundamentally different. The chain certainly has its share of chicken sandwiches and bowls but its top seller is bone-in chicken, making it a more traditional concept. It uses whole, free range chickens that are slaughtered just 48 hours earlier. “It’s super unique,” Smith said. “It’s a better chicken and super fresh.”
And bone-in chicken has quietly performed well during the pandemic, as consumers sought meal replacements for their entire family. “There’s an unbelievable number of people who want bone-in chicken,” Smith said.
“Chicken is on a growth phase,” he added. “There are literally hundreds of brands out there asking for growth capital, but a lot of them are chicken tenders or sandwiches. That’s not unique enough. We were more interested in something that set it apart.”
Mercato announced the creation of Savory Fund earlier this year. The fund features a team of more than 50 industry veterans, led by Smith, the former CEO of the restaurant operator Four Foods Group.
That team works with its brands to help them grow. And many brands are looking for that experience and growth capital now, as many investment firms have pulled back. “We have the team, we have the capital,” Smith said. “And a lot of fantastic brands have pivoted during the pandemic.”