Velvet Taco announced Tuesday that private-equity firm Leonard Green & Partners became its new majority owner.
The stake was acquired from L Catterton, which served as majority owner for five years, and FB Society (formerly Front Burner Restaurants), the innovation lab that founded the taco chain 10 years ago. Both companies will remain invested in Velvet Taco via significant minority ownership. Terms of the deal weren't disclosed.
"Since we began our partnership with L Catterton, we have continued to raise the bar higher and elevate the one-of-a-kind experience that our guests have come to expect when they choose to dine with Velvet Taco," said Velvet Taco CEO and President Clay Dover in a statement. "L Catterton has been a tremendous partner through this chapter of our growth, and we are excited to have them remain a part of the Velvet Taco family going forward. In addition, we are thrilled to welcome LGP as a new partner as we embark on this next phase of Velvet Taco's national expansion."
Since 2017, the Dallas-based fast casual has expanded from four stores to more than 30 open or in development across six states, and expects to reach 40 locations nationwide by the end of next year. The chain boasts an AUV of $4.3 million, and the most recent stores have earned more than $100,000 in sales during their opening week. On average, stores are 2,500 square feet, but Velvet Taco does have a 400-square-foot food hall location that earns $30,000 in weekly sales.
Velvet Taco has adjusted well to the pandemic, with off-premises sales mixing more than 50 percent compared to roughly 35 percent pre-COVID. In 2020, digital accounted for 42 percent of sales, an 83 percent rise versus 2019, and the brand launched a catering channel that's projected to add $10 million in incremental sales.
"We are proud of what Velvet Taco has become since we initially invested five years ago. The success has been a result of a tremendous partnership with Clay, the Velvet Taco team, and FB Society," Chris Roberts, partner in L Catterton's Growth Fund, said in a statement. "We are excited to welcome LGP to the family and look forward to supporting Clay and the Velvet Taco team as they bring their unique concept to more and more guests across the country."
In addition to Velvet Taco, Leonard Green & Partners also has current investments in Zaxby's and Danny Meyer's Union Square Hospitality Group. The 32-year-old firm, which handles more than $50 billion of assets, has invested in more than 100 companies since it was founded via traditional buyouts, going-private transactions, recapitalizations, growth equity, and selective public equity and debt positions.
"Velvet Taco has established itself as a leader in the fast-casual restaurant category with its innovative, culinary-driven concept and we believe the Company is extremely well positioned for growth and expansion," Evan Hershberg, partner at Leonard Green & Partners, said in a statement. "We are excited to build on the Company's significant momentum and strengthen its brand leadership across the U.S."