Freshly Capitalized Four Foods Group Takes Majority Stake in R&R Barbeque
Four Foods Group has taken a majority stake in the two-unit Salt Lake City-based R&R Barbeque with plans to grow via a unique management equity model.
Andrew Smith, founder and CEO of Four Foods Group, is fresh off a successful $35 million growth fund placement with Opus Bank, Red Bridge Capital and private investors.
He said the company would use $10 million to $15 million to grow the new concept and retain founders Rod and Roger Livingston, twin brothers and champion barbecue competitors.
“We’re really excited, this is a phenomenal opportunity,” said Rod Livingston, who opened R&R’s first location three years ago.
At the two locations in Salt Lake City and South Jordan, Utah, the twins hit an enviable AUV of just under $3 million at their initial locations. With Four Foods Group absorbing the overhead, Smith said they hope to extend that to $3.2 million by year end in a newly developed 5,000 square-foot prototype. They already have two new locations under development in American Fork, Utah, and Spanish Fork, Utah, both of which will help absorb demand in the Salt Lake City market.
The concept has a straightforward menu consisting of barbecue competition-style meats by the pound, sandwiches and plates. It also has a robust catering business that accounts for about 30% of sales buoyed by a catering-only outlet.
Livingston said it was clear they needed to grow when customers began complaining about parking and lack of seating. But investing in growth systems would slow them down.
“Capital isn’t the problem, it’s the systems in place that Andrew brings to the table,” said Livingston. “We couldn’t duplicate those without them infusing a lot of capital to do human resources, positions of CEO and such. We’d probably lose two or three years and have maybe a third of the growth.”
Four Foods Group first found success in the restaurant space as a franchisee in Kneaders Bakery and Café, growing to 43 units across the western states via a unique growth model. Under the model, Four Foods Group buys the land, builds the restaurant and maintains all the back-office and support infrastructure. An investor-operator buys into a company to the tune of $100,000 for a 30% to 40% equity stake in the business.
Smith said they would use the same model to scale R&R Barbeque.
“The way we see it is, we’re going to come in with that engine to scale it, but we’re not going to touch the vibe, the culture, the brand the food—nothing,” said Smith. “We’re going to have Rod and Roger protect that and we’ll scale it. We think this is the next barbecue joint for the western United States. And with us behind them, we don’t think there will be anyone that can compete.”
He said they would also build on the retail success seen at Kneaders with gift baskets. He said there are plenty of opportunities to label the brothers’ barbecue sauces and some other brands.
“We’re definitely going to be labeling it and selling it in our shops but also in the retail distribution market,” said Smith.
Smith said he’d been searching for a brand like this for a while and met the Livingston brothers at an event they catered. He couldn’t jump on the investment until his exclusivity with Kneaders ran out and the cap table was cleaned up. He said the new funds were vital to the new investment, and big banks weren’t eager to invest in regional brand operators.
“We were introduced to Opus Bank out of California, and the process was a dream. The team and their credit facility team came in and they did due diligence extremely quickly, underwriting was unbelievable and then the whole legal process was unbelievable. It was really an unparalleled situation,” said Smith. “They came in and took out all my other layers of banks and refinanced that and gave us fresh dry powder to grow on.”
He said a revolving debt facility from Red Bridge Capital will help cover their land acquisitions and development, and the private investors filled out the final chunk of the funding round.
Smith said that funding would also help fuel growth for Kneaders as they expand into the Midwest.
Joel Weinstein of W Partners served as an advisor on the R&R deal.