Financing

Urban Plates refinances with $27 million investment

The deal will help the 17-unit Southern California fast-casual concept accelerate growth.
Urban Plates has been expanding mostly in Southern California. |Photo courtesy of Urban Plates.

Urban Plates on Thursday announced a $27 million investment that will enable the fast-casual chain to accelerate growth and refinance debt.

The 17-unit concept based in Solana Beach, Calif., said it closed on a refinancing deal from investment funds managed by Morgan Stanley Expansion Capital. The chain is planning to add two more restaurants this year and then pick up the pace. Another two to four are planned in 2024, and the company plans to ramp that up to eight to 10 per year, all company owned, said CEO and co-founder Saad Nadhir.

Nick Nocito, executive director of Morgan Stanley Expansion Capital, said in a statement, “Urban Plates is a unique and differentiated fast-casual concept, providing consumers with incredible quality for value. We are thrilled to partner with the team to help them execute the next chapter of growth and expansion.”

Urban Plates was founded in 2011 by Nadhir and John Zagara, who first opened the brand in Del Mar, Calif., and it has grown throughout Southern California and, more recently, into the Northern half of the state. The concept is built around from-scratch cooking in open kitchens serving clean ingredients, like hormone- and antibiotic-free meats, humanely sourced chicken and eggs and sustainable seafood, for example.

Before the pandemic, dine-in guests ordered off a cafeteria-style makeline. In 2019, the company was planning growth of eight to 10 units per year, and there were three Urban Plates on the East Coast. But when the pandemic hit, the chain was forced to retrench and those East Coast units were closed.

Urban Plates then made investments to evolve the brand for the post-Covid era, Nadhir said.

Over the past three years, restaurants have been streamlined and technology investments have enabled the chain to grow digital sales to about half of orders. Now guests order at the main point of sale, rather than walking the line, but kitchens are still open and food is run to tables or prepared for to-go.

Nadhir, who was co-chair and CEO of Boston Market from 1996 to 1998, said the menu and the concept are “right for the times” as a sort of fast-casual/casual-dining hybrid. Restaurants serve beer and wine, for example, and the atmosphere is a bit more elevated for the fast-casual segment, with real plates and silverware.

“One positive result of the pandemic is that people have gotten comfortable in using us in multiple ways," said Nadhir. "They can come on a Friday night and sit down and have a nice dinner with a glass of wine, or they can come for a grab-and-go lunch on a weekday or order delivery."

Restaurants, which are typically between 3,000- and 3,500-square-feet, in the second quarter generated an average unit volume of $4.3 million, he said, and that average has been trending even higher so far in the third quarter.

It’s also a relatively value-positioned chain, though Nadhir said multiple price increases last year to address commodity inflation had a negative impact on traffic. So earlier this year, Urban Plates announced it would drop prices on some of the most popular menu options, expanding its Everyday Value Menu to include 13 items for $13 or less. A 3 UP Plate, for example, includes a choice of three sides, a Caesar salad or house salad, for $9.95.

In 2021, Urban Plates launched Plate Pass, one of the industry’s first subscription programs. For $5 per month, members receive a 20% discount for themselves and everyone on their check, up to 15 entrees. The discount also applies to desserts, beverages, wine and beer and add-ons.

Urban Plates is currently operating only in California, but Nadhir said growth will expand in the West, probably to Arizona, Nevada and perhaps Utah next.

"It'll take some time to rebuild the real estate pipeline," he said.

UPDATE: This article has been updated with new information from CEO Saad Nadhir.

 

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