Freddy's Explores Sale Amidst Franchise M&A Surge
Deal News | Nov 21, 2024 | EIN
Freddy's Frozen Custard and Steakburgers is considering a sale, as reported by Reuters. The fast-casual chain known for its franchise-heavy model has been put up for sale by its private equity owner Thompson Street Capital Partners, just four years after its acquisition. The potential deal is anticipated to value the chain at around $1 billion. Freddy's has shown significant growth, with a 14.3% annual increase in system sales over the last five years, reaching nearly $1 billion in system-wide sales from over 500 restaurants. About 94% of these are operated by franchisees. The interest in Freddy's is indicative of a broader trend in the M&A market, where franchised brands with strong growth metrics are in high demand, evidenced by Blackstone's recent acquisition of Jersey Mike's and Tropical Smoothie. William Blair has been hired to coordinate the sale, expecting the chain to fetch a multiple of 20 times EBITDA.
Sectors
- Franchising
- Private Equity
- Fast Casual Dining
Geography
- United States – Freddy's Frozen Custard and Steakburgers primarily operates in the U.S., and the sale is in line with the trends observed in the U.S. fast-casual dining sector.
Industry
- Franchising – Freddy's operates as a franchise-heavy restaurant chain, with 94% of its locations run by franchisees.
- Private Equity – Thompson Street Capital Partners, a private equity firm, owns Freddy's and is considering selling the chain.
- Fast Casual Dining – Freddy's is recognized as a fast-casual dining brand, operating in the competitive U.S. burger category.
Financials
- $1 billion – Anticipated valuation for the sale of Freddy's Frozen Custard and Steakburgers.
- 20 times EBITDA – Expected valuation multiple for Freddy's.
Participants
| Name | Role | Type | Description |
|---|---|---|---|
| Freddy's Frozen Custard and Steakburgers | Target Company | Company | A fast-casual restaurant chain known for its custards and steakburgers, with strong growth metrics. |
| Thompson Street Capital Partners | Selling Company | Company | A private equity firm currently owning Freddy's, considering selling the chain. |
| William Blair | Investment Bank | Company | Hired by Freddy's to facilitate the sale process. |
| Blackstone | Other Company | Company | A private equity firm recently acquiring other franchise brands, showcasing the active M&A market. |