Fast casual Dig, formerly known as Dig Inn, has engaged Piper Sandler as an investment bank to raise funding, a company spokesperson confirmed. A report from Debtwire called it “rescue financing,” but Dig told QSR it was actually “growth funding” intended to “both get through COVID and to continue to grow the business.”
“It is in inaccurate to say this is rescue financing,” the brand said.
Citing “three sources familiar with the situation” Debtwire reported Wednesday the New York-based company, which changed its name in summer 2019, was seeking roughly $15 million in new money to replenish liquidity. And proceeds from a potential deal would help offset cash burn. Dig denied this, too, calling it “not correct.”
COVID, and the office closures that followed, dampened Dig’s lunchtime base. Its revenue tumbled 90 percent as of March 2020, which Dig confirmed, but added, “revenue has increased substantially since the initial COVID mandated closures.”
An earlier report in Marker said Dig missed 2019 earnings targets by $10 million, citing former employees. Dig’s spokesperson called this figure “grossly inaccurate,” and said the company doesn’t disclose specific earnings targets.
Toward the end of March, Dig laid off an estimated 40 percent of its 100-person corporate workforce, Marker said, referencing an email from founder and CEO Adam Eskin as well as interviews with ex-employees. The article said workers were notified via text message, with a phone call following 15 minutes later. According to Dig, all laid-off employees were notified via in-person meetings and phone calls, when meetings were not possible. “Employees received calendar invites for these meetings, and were texted if they missed the meeting time to check on attendance, but no employee was alerted by text of a job status change,” the spokesperson said.Severance was based on tenure for layoffs, with a minimum of two weeks pay but up to 13 weeks for tenured employees, the company said. Additionally, a $2 per hour bonus pay has been in place for hourly workers since April.
In Center for an Urban Future’s 13th annual ranking of national retailers in New York City, released in December, the organization said Dig registered a net loss of 19 locations during COVID. It suggested Dig temporarily shuttered all but six units, each of which was based in Manhattan.
Dig’s spokesperson said, in fact, after initial COVID closures, the company temporarily shuttered all but nine, keeping all markets open (New York City; Rye, New York; Philadelphia; and Boston).
“We have since opened five more, and will open another four more by the end of Q1,” the spokesperson said. “We have a reopening plan that enables all locations to fully reopen in 2021.”
According to Dig’s website, there are two Boston stores, one in Brooklyn, New York, six in Manhattan, one in Philadelphia, and one in Rye Ridge, New York. In 2019, there were 25 NYC venues.
Dig’s spokesperson said recent updates bring the present figure to 10 in New York, including Brooklyn, two in Boston, one in Philadelphia, and one in Rye Ridge.
Since the beginning of the pandemic, Dig said it’s donated more than 160,000 meals through its “Dig Feeds” program that supplies meals to hospital workers, homeless shelters, senior centers, and other partners in need.
Eskin, a former private equity associate, founded Dig in 2011. The company raised $20 million in 2019 through an equity round mainly funded by Danny Meyer-backed Enlightened Hospitality Investments ($15 million). At the time, Dig planned to expand and develop a proprietary delivery service, Room Service. The path included opening its first full-service restaurant in Manhattan and buying property in upstate New York to build a training center and grow produce. It has a farm in Chester, New York.
Additionally, the company planned to hire 300 additional employees, “many of which have never stepped foot in a restaurant kitchen,” Eskin wrote in a Medium article. They’ll “teach them that knife skills are life skills, and how learning how to cook can change everything.”
Dig was one of the original members of QSR’s 40/40 List of startup fast casuals. The brand touts a “farm-to-counter” model that involves working with farmers to plan what it will harvest and cook, and crops that are set in conjunction with menu ideation.
The 2019 raise wasn’t the first time Dig Inn received funding to expand. It previously picked up $30 million in a Series D round led by AVALT, with Monogram Capital Partners and Bill Allen, the former CEO of OSI Restaurant Partners. It said then that it plans to open as many as 15 additional units by the end of 2019.