During COVID-19 times, Winston Churchill’s famous quip, “never let a good crisis go to waste” has made its rounds in the restaurant industry, including the ears of bartaco co-founder Andy Pforzheimer and Red Robin Chairman Dave Pace.
In 2020, Chris Hagar, managing director of consumer, entertainment, and restaurants for private investment firm Stifel Financial Corp., approached the duo about great restaurants being left out of the IPO market for the past five years. Hagar felt there was an imbalance and COVID created some opportunities.
Once Pforzheimer learned Hagar was also speaking to Pace, his first thought was, “If you have Pace, then you don’t need me.” Pace essentially felt the same way. But Hagar encouraged the veterans to talk, and the two discovered they have similar views about COVID accelerating winners and losers.
With their minds leading the way, Tastemaker Acquisition Corp. was formed to find a “COVID winner” and take it public.
Pforzheimer and Pace bring more than 70 years of combined restaurant experience to the table. After co-founding bartaco and Barcelona Wine Bar and serving as CEO for 22 years, he sold the brands in 2018 to Del Frisco’s Restaurant Group for $325 million. For the past couple of years, he’s worked as an adviser for private equity firms operating in the restaurant space. Pace served as president and CEO of Jamba for two and a half years and as president of Carrabba’s Italian Grill for two. He’s worked as Red Robin’s chairman since November 2019.
Now, Pforzheimer and Pace are serving as co-CEOs of newly formed Tastemaker.
“Andy is the entrepreneur. He founded his business, built it successfully, and sold it successfully,” Pace says. “And I, on the other hand, I’m the public company guy, right? So I've done lots of different public companies of scale, but I don't have the experience that Andy does. So I think when we got together there was a lot of alignment about how we thought about the business and the opportunities. But the nice thing was, there was not as much overlap in skills as maybe we thought there might be.”
Tastemaker is a special acquisition company (SPAC), or an entity that raises capital through an IPO with intentions of merging with another company and taking it public. The group is sometimes described as a blank check company.
Tastemaker went public on January 8, raising $240 million after an initial goal of $200 million. It’s listed on the Nasdaq Capital Market and trades under “TMKRU.” Although Tastemaker wasn’t allowed to solicit interest before going public, Pforzheimer says he and Pace know who the players are. The veterans spent the past few months compiling a list of companies they feel should have gone public a couple of years ago.
Pace says Tastemaker is looking for brands that have showcased creativity in navigating the pandemic and have continued to grow, strengthen their balance sheet, and fortify their P&L. Restaurants are about 50 percent of what the team is researching. Thirty percent is related to technology and 20 percent are providers to the restaurant industry.
“What we're not looking for are broken or distressed companies,” Pace says. “We both agree those companies are best fixed in private, and then once you fix them, then you take them public. But you don't try and fix them in a public environment.”
Pforzheimer says 2020 may deserve a pass, but he adds that potential companies must still be growth ready. Numerically, the brand needs a solid profit model because overhead costs of a public company are higher. Tastemaker also wants a company that’s proficient at projections, because Pforzheimer explains that one of the biggest failings of a small company that tries to go public is the inability to accurately predict the future.
Qualitatively speaking, the SPAC will search for great management teams.
“We don't want to be the management team,” Pforzheimer says. “There is what I call early experts—experts at what the world will want five years from now. That's the trick, right? That's where Dave and I and our 40 years of experience each I think matters—where we can look at the landscape and say we think this is where it's going, and we think these guys are the best at it.”
The company has two years to acquire a brand. The Tastemaker team is moving as fast as it can to find the right partner, but several factors will impact the timing. Pace sees it as a numbers game—the more Tastemaker talks to, the more likely it’s going to find the one it wants. Some good companies won’t be interested, while others will show interest, but a deal can’t be struck. Then there’ll be those that didn’t have the stock market on the radar and will have to think over the move. The “yes’s” and “no’s” are the easy ones—it’s the “maybe’s” that will take up most of the time.
However, Pforzheimer says he and Pace have an advantage because they don’t need to figure out who to talk to or how to talk to them—they’ve been doing it for years.
“I don't think we need those two steps necessarily,” Pforzheimer says. “So I think we’ll be faster to get to a ‘yes’ or ‘no’ Then most people would be.”
One doesn’t have to take Pforzheimer’s word for it. McKinsey & Company, a global consulting firm, released a study last year that showed operator-led SPACs have been outperforming their peers. As part of the research, McKinsey analyzed 36 SPACs from 2015 to 2019 of at least $200 million with at least one year of publicly available trading data. The investigation showed operator-led SPACs were better than other SPACs by roughly 40 percent.
A part of that success is finding the right people, and Tastemaker has plenty of talent to share.
Greg Golkin, Tastemaker’s president, has been the managing partner of the Kitchen Fund—an investor in restaurant growth brands—since 2016. Chris Bradley and Andy Heyer bring acquisition and investment wisdom from Mistral Equity Partners while Hal Rosser adds even more depth as founder of Rosser Capital Partners. Also along for the ride are Rick Federico, the former co-CEO and chairman of P.F. Chang’s, and Starlette Johnson, the former vice president and chief strategic officer of Brinker International.
The members have been a part of companies and investment firms that have completed more than 100 merger and acquisition, capital markets, and private investing transactions since 2010.
Basically, Pace and Pforzheimer took Churchill’s words to heart—and then some.
“It’s hugely valuable. We were very conscious and very intentional about the skill sets that we wanted to bring to the team,” Pace says. “There’s restaurant operators, and then there's investors on the team. But even within that, you look at the difference between Andy and I, you've got an entrepreneur and a public company guy. … As we went through our roadshow on our ‘test the waters’ meetings, I think one of the things that we felt resonated with potential investors is that depth, complexity, and complementary skills that we had on the team that would likely help us ensure success.”