Freddy’s parent company is reportedly considering a sale of the fast-casual chain, according to Reuters.
The transaction could value the chain at more than $1 billion, sources told the publication. Owner Thompson Street Capital Partners is working with investment bank William Blair to sort through a sales process, Reuters said.
Freddy’s has more than 500 restaurants nationwide, with 95 percent of that operated by franchisees. AUV was $2 million in 2023, up from roughly $1.6 million in 2019, and adjusted EBITDA was around $38 million. Last year the brand earned $928 million in systemwide sales, and it projects $975 million in 2024. After a record 62 store openings in 2023, Freddy’s said earlier this year that it hoped to debut about 65 restaurants in 2024. The fast casual has shut down only 22 locations in its 22-year history. The company believes it has enough whitespace for 3,000-plus restaurants in existing and new markets across North America. Its biggest footprints are in Texas, Oklahoma, Missouri, Nebraska, and Colorado.
Burgers account for 63 percent of sales. After that it’s custard (15 percent), chicken (9 percent), kids meals (5 percent), hot dogs (4 percent), and individual side items (4 percent). Off-premises mixes 68 percent compared to 32 percent dine-in, which is a complete flip from pre-COVID times. Of those sales outside the four walls, 51 percent come via drive-thru, 10 percent carryout, and 7 percent third-party delivery. Forty percent of guests arrive at dinner, 32 percent come at lunch, and 28 percent order in the afternoon or late evening.
“[We’re] really the only better burger that goes coast to coast,” CEO Chris Dull said earlier this year. “We compete with In-N-Out on the western side of the U.S. We compete with Whataburger throughout Texas in the middle of the U.S. We compete with Five Guys in the East, and we compete with Culver’s in the North. But those guys don’t all compete with each other. Really the Northeast is the last frontier for us, but we’re coming.”
Thompson Street Capital purchased Freddy’s in 2021 from the chain’s founders.
M&A activity appears to be heating up in the restaurant segment. In April, Blackstone announced it purchased Tropical Smoothie Cafe; the deal was reportedly worth around $2 billion. The same firm also plans to acquire a majority interest in Jersey Mike’s, the fastest-growing sandwich chain in America, and previously announced an investment in 7 Brew, a beverage chain that’s skyrocketed from fewer than 10 stores to nearly 300 since 2021. Also in April, Roark Capital completed its acquisition of Subway from the founding families. The deal was reportedly worth around $9.6 billion. In casual dining, Olive Garden parent Darden Restaurants announced in October that it acquired Chuy’s for approximately $605 million.
