The 104-percent first-day return for Noodles & Company’s IPO late last month was the best performance by a restaurant IPO in at least a dozen years, and maybe longer. That kind of performance will almost certainly lead to more offerings—but which restaurant chains could be next to take the leap?
Guillermo Perales seems to be collecting restaurant brands like other people collect stamps or bubble gum cards. The CEO of Sun Holdings bought stores with another concept this month: Krispy Kreme, making it the latest in a series of deals that has vaulted Sun into one of the 10 largest restaurant franchisees in the country.
When Noodles & Company doubled in price on its first day of trading, some commentators called the performance “surprising.” But anybody who follows restaurant stocks knows there was nothing surprising about it: perceived growth chains are so rare on the equity markets that those who do go public get a big premium.
Restaurants can breathe a little easier now. The Obama administration’s decision yesterday to delay enforcement of employer penalties until 2015 gives the industry a one-year reprieve to figure out how they’re going to comply with the rules. But the delay’s ultimate impact will likely be modest at best.
We’ve been saying for a while now that big franchisees have had the access to capital and willingness to expand and grow, and the best proof comes from our latest Monitor 200 ranking of the largest restaurant franchisees. Collectively, that group’s sales and unit count easily outpaced the broader restaurant industry.
Few things can upend a franchise acquisition much like a remodel project. If a franchisee has a remodeling coming due on any of its locations but wants to sell, the negotiations over who pays for the project can upend a sale process. But remodels may also be keeping some buyers from the market altogether.
(Editor's note: This post has been updated to reflect an updated closing price.) In January 2006, Chipotle Mexican Grill went public at $22 a share. The company would finish the day at $44 a share, a 100-percent increase, and the best IPO in five years. But on Friday, another fast-casual concept, run by many of the same people, beat that performance. Noodles finished up 104 percent on the day.
Restaurants had their best month in more than a year, at least according to one indicator. The National Restaurant Association said that its monthly Restaurant Performance Index rose to a 14-month high last month, driven largely by the strongest sales and traffic performance since March 2012.
We’ve been saying for some time that restaurant investors are hungry for growth concepts, and today that theory should be tested when Noodles & Company goes public. But so far, indications from the Broomfield, Colorado-based chain’s pricing has shown that we were absolutely right.
Low interest rates, refranchising, retirements and private equity have all conspired to generate some supersized franchisees, including two that, according to our recently released Monitor 200, are at or above $1 billion in annual sales. This has led some to wonder whether one of these big operators could go public at some point.
Scout Capital Management says that Canadian doughnut and coffee chain Tim Hortons is underperforming on Wall Street, and points a finger squarely at the company’s management. Scout, owner of 5.5 percent of Tim’s shares, is pushing for some changes it believes could increase the company’s share price five-fold over the next decade.
Looks like investors are hungry for Noodles. The Broomfield, Colorado-based noodle chain increased the size of its offering, according to an SEC filing this morning. The company now plans to sell 5.4 million shares at $15 to $17 a share and raise $86 million in its upcoming initial public offering.
Guess that answers the mystery of Famous Dave’s stock price. Farnam Street Partners, an investment fund based in Minnesota, has taken an activist position in the barbecue chain after buying up 5.2 percent of the company’s stock in recent days, according to an SEC filing this morning. That’s the third investor with an activist position in the company.
We’re stumped. Famous Dave’s, the Minneapolis-based chain of barbecue restaurants, has seen its stock soar nearly 20 percent over the past three days, and nobody seems to know why. The increase has taken Dave’s stock to heights enjoyed by relatively few restaurant chains on the public markets.
Shortly after NPC International announced plans to acquire 24 Wendy’s restaurants near Kansas City last week, CEO Jim Schwartz said that the company “probably won’t take too much time” to make another deal. He apparently wasn’t joking. The big Pizza Hut franchisee today announced plans to acquire 13 more in the same market.
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