Savory Fund—an investment entity focused on partnering with high-potential, profitable, and emerging restaurants—has amassed quite a portfolio of brands since it surfaced about six years ago.
Based near Salt Lake City, Utah, Savory launched a $100 million fundraise in 2018 and closed in October 2020. Fund II closed at $100 million in 2021. The company recently launched a third fund, this time with a value of $200 million. Along that journey, the company has built a collection of 11 concepts—Swig, R&R BBQ, PINCHO, Via 313 Pizzeria, Mo’ Bettahs, 86 Repairs, Saigon Hustle, Hash Kitchen, The Sicilian Butcher, Houston TX Hot Chicken, and South Block. Some are fast casual; others are casual dining. Cuisines range from chicken and breakfast to Vietnamese and Hawaiian.
All of it may never have happened if married couple Andrew and Shauna Smith hadn’t taken some risks more than 15 years ago. Or as they passionately call it, a few “moonshots.”
Falling in Love with Food
It was 2007. Shauna loved being a mom, but she knew there was something more she wanted to do with her time and energy. Hailing from the South—with hospitality and serving others part of her core identity—opening a restaurant was chosen as her next challenge. The couple opened a Kneaders Bakery & Cafe unit in Lehi, Utah, in October 2008, right in the middle of the Great Recession.
“The worst time anyone could open a restaurant,” Shauna recalls. “And yet we had people flooding into our restaurant. We were having great success and also having a great time. And I didn’t know at the time that I actually didn’t know a ton about running a restaurant. All I knew was that I loved the work. I am Southern. So hospitality is naturally in my DNA, and it came very natural to me to be inside the four walls of the restaurant, to be shoulder-to-shoulder with the team, working with the team and the guests, and preparing food. I love serving people through food and that’s really where it began.”
Meanwhile, Andrew was busy dealing with the cyclical nature of the tech industry. He went through the dot-com bubble in the early 2000s and survived. He managed through the 2008 crash as well. In between these years and devastating economic occurrences, Andrew started and sold companies, but couldn’t help but notice the stability Shauna was experiencing in the restaurant.
So he decided it was time for a career switch.
“I called up Shauna and said, ‘I think that I’d like to join you in the food and beverage industry,’” Andrew says. “She said, ‘Yeah, come on in. My dishwasher called out so you can wash dishes.’ And so I’m like, ‘I got this.’ About two hours into my first shift, I thought I just screwed up my whole life. What am I doing? But it took me only a couple days to get stung by the bee like Shauna.”
The first goal post was opening five locations. Once that was achieved, the possibilities kept getting higher. Under parent company Four Foods Group, Andrew and Shauna developed 50 Kneaders in multiple states, operated more than 70 Little Caesars restaurants in the Southeast, and invested in three up-and-coming Utah-based chains—Swig, R&R BBQ, and Mo’ Bettahs.
To Andrew, the main driver was job opportunities during a recession. He remembers people applying for roles who had been in boardrooms and served as CEOs, and others who simply needed to put food on the table. Throughout its run, Four Foods Group earned more than $1.2 billion in sales and was named one of the fastest-growing restaurant operations in the U.S. for two straight years by Restaurant Monitor.
“It’s been really good to us and it’s been really, really fun to do,” Andrew says. “Has it all been up into the right and perfectly green? No. There’s been some failures along the way that have really taught us lessons that have made us stronger. And then we go through a worldwide pandemic and that taught us a lot as well.”
Savory Starts Tasting
Andrew and Shauna realized the difficulty of funding growth, especially with banks not willing to take on that type of risk.
A new avenue revealed itself while Andrew was racing semi-pro for Porsche. He was rubbing elbows with CEOs of other tech companies and private equity firms, and one of them happened to be Greg Warnock from Mercato Partners.
“He is an oracle of an investor,” Andrew says. “And he said, ‘How is your business? And how are you growing and how are you financing it?’ And initially, it was like, ‘Well, it’s the Bank of Andrew and Shauna and then our local banks, so friends and family of Andrew and Shauna.’ But either way, he said, ‘Well, have you ever thought about standing it up as a private equity fund, putting your money in that? And also clubbing together other high net worth individuals and family offices and other things?’ And I said, ‘No, I haven’t thought about doing that, but it would be a lot easier.’”
At the time, Warnock had been in the business for decades. He had the proper backbone and institutional knowledge that Andrew and Shauna were looking for. He invited the couple to join his firm, where they partnered to stand up Savory. The duo had five assets when the fund began (Kneaders, Little Caesars, R&R BBQ, Mo’ Bettah’s, and Swig), but they decided to sell their franchise operations in the first two concepts and double down on corporate ownership.
Warnock and Andrew serve as managing directors of Savory while Shauna works as CEO. They are joined by dozens of food and beverage veterans who supply years of combined experience to invested restaurants. Andrew refers to it as an “army that gets into the trenches with these [restaurant operators]. When they’re crawling, we get them to walking and then we help them run.”
Savory focuses on brands that are excelling above the rest of their peers, according to the couple. Andrew understands that he could enter a community and visit 35 taquerias, but he also knows that only so many of them could become the next Velvet Taco or Torchy’s Tacos. They want to walk in and feel an “it” factor—not just food quality, but the sights, sounds, and smells. The dollars matter too. Stores have to be performing better than competitors in terms of revenue and margin. It can’t just be high sales figures with minimal margin. From experience, Andrew and Shauna know how tough it is to run that type of business.
Arguably, the top consideration is founders and partners who share a similar philosophy.
“When we meet with people and it’s not a fit because all they care about is money or something like that, then it’s not really a fit for us because the journey is long and hard and it’s got to be about other things than the money,” Andrew says. “So the partners are a big part of it.”
Shauna adds that whatever the product is, it needs to have whitespace. The chain may be in one or two geographies when Savory invests, but there has to be a runway to bring the offering to the masses. The fund doesn’t ask for teams to be perfect. However, being growth-minded, humble, scrappy, and hardworking are all tablestakes. Andrew and Shauna figure if operators are built this way beforehand, that will continue after a capital injection.
“We don’t mind complex, but it needs to be scalable, and sometimes overly complex is not scalable,” Shauna says. “And when I think about what makes it overly complex versus just complex, it can be as simple as how chef-based the recipes are or how employees have to be very specialized versus generalists. So those are the things that you’re saying, if you and I can’t do it, it’s probably not scalable.”
While COVID has shown how resilient restaurants can be, it also proved the industry is capable of being extremely unforgiving. That’s why Savory prefers not to invest its dollars in white tablecloth establishments. Andrew and Shauna enjoy fine dining and being showered in service, but there’s inherently more risk and it’s harder to expand. Also, a smaller segment of consumers will patronize those concepts frequently. Savory wants to buy into brands where the visitation is at least once per month and the ticket average isn’t so high that someone can only afford to visit every quarter or six months.
Andrew and Shauna receive inquiries all the time from people who say they should take a look at a restaurant in a certain neighborhood. Sometimes that’s all it should be—a community fan favorite.
“You don’t want to mess it up. It’s not scalable,” Andrew says. “It’s too hard to scale something like that. It should just stay the two or three or four units that it is. There’s a lot of brands like that and when people say we want to grow this, we’re quick to be the ones that say, ‘Please don’t. This is a great lifestyle business. You’ve got a great product. You can’t scale this.’ So we always advise people when they shouldn’t scale.”
Within Savory’s portfolio, some chains are corporately run and others grow via franchising. For instance, Swig—a dirty soda brand—unveiled its franchising program in early 2023 and had 250 units enter the pipeline in six months across Florida, North Carolina, South Carolina, Tennessee, Arkansas, Missouri, and Idaho. Mo’ Bettahs is growing with nearly 50 company-owned units.
The decision of whether to franchise a brand starts with a question that Shauna and Andrew ask themselves: Would we franchise it? That’s drawing on a background of operating more than 120 franchised locations across two chains. The two understand how it feels to have a franchisor impose guidelines that don’t make sense. That’s why the couple values building a strong corporate base that can be used to prove and test technology, menu items, and other matters before passing it along to operators. Andrew and Shauna also want to ensure data shows restaurateurs’ margins are large enough to bring quality of life and cash flow to pay off bank financing. If those economics don’t work, then a concept shouldn’t be a franchise.
“There’s too many people that take franchising and say we’re going to franchise so that we don’t have to raise money,” Andrew says. “They take the money from the franchisees, they live on that money, and if they’re not selling franchises, they’re dead. We believe, build an organization to support yourself and be self-sufficient. And then the franchise should be the cherry on top when the other way around is what most people do. I think it’s death by 1,000 cuts for a lot of those brands.”
Spreading the Wealth
Andrew and Shauna’s motivation to help others led to a Million Dollar Restaurant Launch in 2021. Savory sought to assist an independent operator who may have lost their unit during COVID or was trying to get a concept off the ground. As Savory continued to get bigger, onlookers expected the company to do more for the industry.
“You guys are getting bigger and going further up the stream and you’re not taking care of the little guy,” says Andrew, remembering what some were commenting. “We have started as the little guys multiple times in our journey. Like Shauna said, we’re entrepreneurs. So we said, ‘Well, let’s support that segment as well.’ We want to make sure people know that we’re not going upstream. We’re going to stay within the entrepreneurial community of start-ups. Although our thesis is really to get involved in something that’s four, five, six units, and above where they have had several years of growth and they have some more data, we decided to do this. It might be the first of many that we do in the future.”
The competition received hundreds of applicants. Savory conducted Zoom interviews and many times sent teams to visit the restaurant. After combing through choices, the fund landed on Saigon Hustle, a concept run by best friends Sandy Nguyen and Cassie Ghaffar. The women’s objective is to offer a Vietnamese menu that’s approachable to anyone in the Houston metro area.
Shauna, reminded of her start in restaurants and her role as a mother and wife, was drawn to Nguyen and Ghaffar’s similar entrepreneurial spirit. They knew every detail of their restaurant and taught Shauna new things. Saigon Hustle currently has one location open. The second outlet was in the process of being built as of January.
“You are on fire already in all the best ways. And then we went and saw their first store and it’s so rad,” Shauna says. “They’ve got impeccable taste. The food was outstanding. It is something that everyone wants. Even if they don’t know they want it, they are going to want it. So I was a moth to the flame for those Saigon Hustle girls, and still whenever we are talking to them, meeting with them, they are an absolute joy and they’re brilliant. They are going to do great things.”
As Savory’s reputation grew, interest flipped to 90-95 percent inbound. The worst part of this, Andrew says, is that the fund can’t give money to everyone. Still, the company felt like it had so much more to send to the industry. So it created Restaurantology, a self-funded, annual conference exclusive to restaurant operators. At this event, Savory pulls its teams together to share the best tips and guide others on what’s working in the food and beverage segment.
Those in attendance are usually restaurateurs with two to 10 stores who are figuring out their next move. Andrew, Shauna, and other Savory leaders aren’t looking to be gatekeepers. Instead, they want to be transparent about their past successes and failures in hopes that it might set someone else on the right path, even if Savory can’t be part of it.
In 2023, the conference touched on relevant topics like supply chain shortages, labor issues, raising capital, and building the right team.
“If we can’t give them the leg up of funding, at least we can give them some of the knowledge, and that is really where Restaurantology came in,” Andrew says. “But also there are some brands, they didn’t make the cut necessarily for an investment, but we’re on their speed dial. They call us with little special questions and circumstances where they’re like, ‘Hey, can I just get your ear for 15 minutes?’ And that’s also how we can continue to foster these relationships. And you know, there have been some that kept us on speed dial and ended up becoming an investment because we did see them continue to grow and thrive through the years.”
Savory isn’t a fund that puts money in and waits for a return in five or six years, Andrew says. The company gets into the details with the restaurant brand and works shoulder-to-shoulder with them. These chains are already profitable, and Savory is overlaying a playbook on how to transform managers into better leaders, optimize balance sheets in regard to contracts, food pricing, and labor models, and use marketing strategies to build revenue.
In the future, Savory will focus on chains that provide convenience and give consumers value for their dollars. Having a source of entertainment is also key. The trick is balancing these aspects with the proper food quality. Simplicity has become of utmost importance as well, especially during the pandemic when operators were forced to cut costs. Shauna uses the example of Raising Cane’s, a fast-casual restaurant that’s grown rapidly in recent years just by offering chicken, toast, and fries.
“We’re talking a lot about how our experience in the restaurants has gone downhill in the last few years and the service is just not the same,” Shauna says. “And my belief is that people want hospitality back and hospitality is different from service. Service you can get anywhere. But hospitality is how you make people feel when they are inside the restaurant or even when they’re getting takeout or a third-party order. I don’t have the answer to how we’re going to do this, but I have a feeling that there’s going to be a return to hospitality in the next year or two just because we are all feeling the lack of hospitality.”
If a chain is looking for capital, Andrew says they should first determine if their house is in order. He means, are sales, traffic, and sentiment growing? Are reviews solid and getting better? Is the brand unique in the competitive backdrop? All of those questions don’t need a yes, but a majority of them do. It would be hard for a firm to invest otherwise. As Andrew puts it, “a special butter that you get from Iceland” is not going to be enough to set a brand apart.
The other crucial part is knowing if you want a lifestyle or legacy business. Andrew wants to be clear—there’s no shame in choosing the first one. One could have a restaurant that works well at two to five locations and is enough to be an institutional player in a particular region. For some, that’s enough, and that’s more than OK. If choosing legacy, one has to be prepared for change and growth. Those who remain stagnant aren’t going to succeed. Savory comes into the picture to secure an evolution, and so would any other private equity firm.
“We always ask people, ‘Well, are you prepared for the legacy journey?’” Andrew says. “Because the legacy journey is more people touching your baby. More people telling you that maybe your baby is ugly and that you have to do this to make it look better. And that’s uncomfortable for some people, and some brands can’t go through that. Make sure your house is in order and make sure that you decide, do you really truly want to be a legacy business?”
