With 2025 well underway, quick-service restaurants are moving beyond traditional brick-and-mortar operations into consumer-packaged goods. Some that have made the jump have seen amplification in their brand extension and revenue diversification. This strategic move requires significant capital investment, and choosing the proper funding mechanism can determine whether there will be a successful expansion or unnecessary financial strain.
The Evolving QSR-to-CPG Landscape
The QSR industry continues to bear the brunt of shifting consumer preferences and taxing economic realities. With operating costs rising and consumers demanding good quality and value, restaurants turn to new revenue streams that leverage their brand equity. CPG development allows restaurants to extend beyond physical locations into retail environments, where their products can be seen and consumed differently.
Strategic Funding Pathways
QSRs have several pathways when considering funding options for CPG development. As an example, for established brands, crowdfunding platforms have evolved from novelty funding sources to legitimate capital-raising tools. These platforms provide market validation and brand evangelism alongside new financial resources for QSRs with a strong customer base. This approach allows for minimal equity dilution compared to traditional venture capital, while functioning as a built-in marketing campaign that generates product awareness and pre-production customer feedback. However, success often depends on existing brand recognition and a strong social media presence, while also having limited capital potential compared to institutional investments.
Revenue-sharing models offer another increasingly popular alternative to traditional financing, directly aligning investor returns with business performance without transferring ownership. These deals preserve equity ownership while ensuring payment obligations scale with business performance. They offer more flexible terms than traditional loans and can be structured to end after certain return thresholds are met. However, there are limitations, including a potentially higher effective cost of capital than traditional debt, as well as possible cash flow constraints during early growth phases. Revenue-sharing agreements work best for established QSRs with predictable revenue streams that are looking for growth capital without having to give up much control.
Traditional equity financing, whether through venture capital, private equity, or strategic corporate investors, is still a common approach for QSRs seeking substantial capital for CPG expansion. This method provides access to larger pools of capital than most alternatives, with strategic investors often providing access to their industry expertise and distribution networks. No immediate repayment obligations allow for cash flows to be preserved, and investors share both the risk and potential upside. The tradeoff comes in dilution of ownership and potential control issues, notably if investor time horizons differ from those of the founders. This option is most workable for high-growth QSR concepts looking to rapidly scale CPG operations with substantial capital requirements.
Established QSRs with strong balance sheets can leverage traditional debt and asset-based financing relationships without sacrificing equity. This approach avoids ownership dilution and typically offers a lower cost of capital than equity financing, with tax-deductible interest payments and more precise terms. The challenges include the necessity for creditworthiness and collateral, creating fixed obligations regardless of business performance, and potentially including restrictive covenants that limit operational flexibility. This approach works best for QSRs with strong credit profiles, significant assets, and predictable cash flows.
How Economic Uncertainty Plays a Role
As the industry forges ahead through this year’s incredibly uncertain economic environment, several macroeconomic factors warrant consideration when selecting funding strategies. Interest rates are expected to stay steady, which could make debt financing options more viable than in recent years. QSRs should evaluate the timing of their capital needs against projected interest rate movements. Additionally, the current administration’s new tariff implementation could significantly impact CPG production costs, particularly for products with imported ingredients or packaging materials. Funding strategies should incorporate sufficient capital buffers to absorb potential supply chain cost increases.
Despite economic headwinds, consumer spending on products delivering health, sustainability, and convenience continues to show resilience. CPG strategies aligning with these values may find strong market reception and more enthusiastic investor interest. The growing preference for health-conscious and sustainable products mirrors retail purchasing decisions, creating natural synergies for QSR-to-CPG expansions that honor these values.
Aligning Funding with Strategic Objectives
The optimal funding approach will depend on what is available to a particular company and which options align with the company’s overall strategic objectives. Companies must consider their time horizon, how quickly they need to scale CPG operations, control priorities, and the importance of maintaining decision-making authority. Risk tolerance regarding fixed obligations versus performance-based returns and exit strategy considerations should be the guiding factor in the choice, whether the goal is building toward an acquisition, IPO, or long-term private operation.
For many QSRs, the most effective strategy will combine multiple funding mechanisms tailored to different development stages. Early product development might utilize crowdfunding to gain capital and early market validation, while scaling production could be better paired with debt financing backed by purchase orders from retail partners. As the lines between restaurants and retail continue to blur, QSRs that strategically navigate the funding landscape will find themselves well-positioned to capture market share.
The expansion from QSR to CPG represents an opportunity for brand extension and revenue diversification. To succeed, QSRs will need to secure appropriate capital through funding channels that align with their immediate needs and long-term objectives. By carefully evaluating each option against specific business goals, companies can develop a capital strategy supporting CPG expansion and comprehensive multi-channel brand growth.
Roger B. Lee is a partner in Stubbs Alderton & Markiles, LLP‘s corporate practice. Roger’s practice includes advising start-ups, emerging growth, and middle market companies in a wide variety of transactions, and he has worked with companies in varied industries, including restaurants, consumer products, and food and beverage.
