Punch Bowl Social Set to Strike With L Catterton Partnership


Punch Bowl Social is poised for a new phase of growth with an investment from L Catterton.

Founder and CEO Robert Thompson said L Catterton the ideal group to help continue the Denver-based entertainment gastropub’s aggressive growth schedule.

“This is the deal we’ve been working on and this is the group we wanted to do it with,” said Thompson. “L Catterton, reputationally it’s the best consumer-focused group in the world, and they have a significant history of getting brands to the next level in terms of growth.”

Thompson said the brand has been building a relationship with L Catterton for four years. That meant proving they had what it takes to get to the next level.

“Growth investors require the infrastructure and the management structure to handle that growth ahead of the growth,” said Thompson at the 2017 ICR Conference. “And in the long term, we need their institutional systems knowledge.”

Over the past two years, Punch Bowl Social added Ruby Tuesday alum-turned-consultant Robert LeBoeuf as chief people officer and Richard Flaherty as COO. Flaherty is another Ruby Tuesday alum who also worked on Yard Bird as a VP of operations. That builds on the leadership of Thompson and CFO Robert Cornog, formerly an investment banker with Merrill Lynch.

With the management team honed, L Catterton was ready to partner with the pioneers in the segment.

“Punch Bowl Social is a unique dining experience unmatched by other traditional eateries,” said Jon Owsley, co-managing partner of L Catterton’s Growth Fund in a press release. “Robert is a pioneer in the ‘experiential’ dining and high-volume bar category, leading Punch Bowl Social’s tremendous growth over the past five years by blending differentiated culinary and social experiences in an authentic and engaging environment. Punch Bowl Social is positioned for long-term growth due to their proven success with the millennial consumer, and we look forward to working with their experienced management team to accelerate their expansion.”

The market share-devouring “eatertainment” monstrosity comes in a 20,000- to 27,000-square-foot box that pulls in from $4 million at a mediocre location to $8 million average unit volumes by hooking consumers with games so they stay longer, eat more and pound punch. And those numbers are set to go even higher in the next wave of locations.

“Our AUV for new units is going to surpass the historical AUVs, we’ve been able to really perfect our real estate model. That’s going to help drive the AUVs across the system on average,” said Thompson.

The key to those impressive AUVs, the 50% cash-on-cash return is the brand’s quasi-urban locations.

“We figured out this balance across the units of urban and quasi-urban locations that really is the ecosystem that the PBS performs best in,” Thompson.

It’s where suburban millennials and generation Z consumers congregate, where there is plenty of family housing nearby and plenty of nearby businesses to keep the lunch day part going strong (corporate events account for 25% of sales on average). And because it’s not Main and Main, he’s able to keep rent in the 9% to 12% range. Thompson points to the St. Louis Park location near Minneapolis that opened in November 2016 as the ideal location under the brand’s real estate strategy going forward.

“I think that there is a void and an opportunity in the marketplace across the landscape, in particular there in Minneapolis we were able to identify this quasi-urban location,” said Thompson, noting that it’s been the best performer in the system with AUVs well above than the system average. “We think success there can be replicated in other quasi-urban locations.”

Landlords love the brand; it brings the tricky younger demographics and their money to surrounding businesses and livens up the off-Main trade areas that have had some volatile traffic as retail changes dramatically. Thompson said if a typical location costs $5 million to build, he can get 50% or more from the landlord in the lease. At the third-floor Portland location, for example, while it’s the lowest performer in the system, the landlord made it easy.

“When it's accompanied by $3 million from the landlord, we'll take that every day,” said Thompson.

He projects five or six locations each year, with 25 across the system in the next few years. Currently there are nine locations and another 10 locations in various stages of completion. The next two locations will be in a “classic Brooklyn warehouse in Bushwick and a second location in the Denver market will be in one of those quasi-urban spots: inside the iconic Stapleton air traffic control tower just outside the Denver core."

“This building is the last vestige of the old Stapleton Airport, so we were interested in helping preserve that,” Thompson told Bisnow, a real estate publication. “It helps us solidify ourselves as an iconic brand coming out of Colorado. That's important for us nationally, but especially in Colorado.”

Stapleton residents are eager for the new restaurant; the upcoming location’s Facebook page has more than 1,200 likes. But nearby restaurants might not love the new neighbor as legacy brands may see the younger generation walk on by.

“We’re able to take significant market share from the casual dining set. Great food is a minimum requirement, so we focus on that day one. That will always win whether you have the entertainment,” said Thompson. “But when you pair that entertainment with great food, it’s not something that exists and it’s something they are really hungry for.”

He admitted that food costs are “two to three points” higher than other operations, but nods from Zagat for the chicken biscuit and other favorites from celebrity chef Hugh Acheson (of "Top Chef" and a James Beard winner) keep people coming.

The operations have largely been perfected too, according to Thompson. Borrowing from the iconic Hillstone group, Punch Bowl Social implemented a zoned service model that breaks up the large footprint into zones that mesh well with various alcoves within the restaurant and entertainment complex.

“From day one of zoned service model, we were able to raise our Yelp score by half a star,” said Thompson.

Terms of the transaction were not disclosed, but Thompson referred to the deal as a “partnership” above all. LCatterton also has a stake in Hopdoddy, P.F. Chang’s, Anthony’s Coal Fired Pizza, Chopt Creative Salad Company, PIADA, First Watch, and Velvet Taco.

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