Mercato Partners' venture into the restaurant industry went so well the first time around that it’s digging in its heels. The private investment firm announced Wednesday the closing of Savory Fund II, a $100 million growth vehicle targeting emerging and profitable food and drink concepts.
The fund is a significant follow-up to Savory Fund I, which closed on $100 million last year and struck notable investments in The Crack Shack, Mo’Bettahs, R&R Barbeque, Swig, and Via 313. Mercato is on pace to open more than 40 locations across its portfolio this year, with 70 more openings targeted for 2022. Since the inception of the Savory Fund Practice in 2018, the investment firm has deployed $65 million and allocated an additional $15 million in growth capital.
Savory Fund II will seek six to seven new brands. Limited partners in the fund include existing and new investors, such as institutional investors, family offices, and financial services and advisory firms. Seventy-two percent of investors in Savory Fund I have committed to Savory Fund II.
The fund is managed by General Partners Andrew K. Smith and Greg Warnock, in addition to 65 food and beverage professionals. Smith said Savory will take advantage of reopenings across the U.S. and the desire to try new concepts. He added that the fund is starting during a period in which many favorable sites have become available due to the pandemic.
“We are grateful for the continued support of our investors, especially after closing Fund I less than one year ago,” said Smith in a statement. “As one of the few firms operating in this industry niche, they understand our mission of partnering with leading entrepreneurs early in their business’ life cycles and accelerating their brand and operations nationally. The last year has shown that skilled, active managers can provide true alpha to investment portfolios beyond market rate returns. Striving for outperformance will always be a feature of Savory’s DNA.”
“Through the deployment of Fund I, we have developed a replicable playbook for success with five amazing companies, not only through the efficient use of capital, but also through on-the-ground operational assistance. We managed to do this despite operating during the most challenging time in the industry’s history. We are grateful for the perseverance of our founders and our loyal employees,” Smith continued.
Mercato’s results speak for themselves. R&R BBQ, Mo’Bettahs, and The Crack Shack each earned spots on QSR’s 40/40 List for 2021. Throughout the life of the portfolio, the brands have exceeded 40 percent growth year-over-year while staying profitable.
Swig President Chase Wardrop said after Swig partnered with Savory in December 2017, the brand has experienced “explosive revenue growth” approaching 300 percent. Additionally, the chain has opened 13 stores, and another 17 are scheduled to open this year. Wardrop said the Savory team has been instrumental in guiding Swig through the growth process and implementing the right technologies, personnel, and strategy to adapt during COVID and remain well-positioned for the future.
“Swig is now poised for additional mind-bending growth in the coming years,” he said in a statement. “Because we have the Savory team behind us, we feel prepared to execute better than ever."