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BFD Expert Voices - Retail Deals

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Freddy's, a Wichita, Kan.-based burger and custard chain, will begin ramping up for a sale or IPO in a year, CEO Chris Dull tells Axios exclusively.

Why it matters: Americans' love of the classic hamburger continues to support the growth of both national and regional chains.

Details: Thompson Street Capital-backed Freddy's has been actively preparing to become a public company, but it could be sold to another private equity firm before it does so.

It is not yet working with an investment bank, he adds.

The big picture: In mid-2023, customer behavior began returning to what it was pre-pandemic, Dull says.

Because of that, Freddy's can more confidently forecast and plan the business for 2024.

By the numbers: Revenue for the chain in 2023 was $150 million to $200 million, while EBITDA was just shy of $40 million and same-store sales growth was 3.8%, Dull says.

Freddy's systemwide sales were $928 million.

Catch up quick: Thompson Street Capital acquired the business in 2021 for an undisclosed price.

Freddy's completed a $135 million debt refinancing in April 2023, led by Wells Fargo, Truist Financial and MUFG Bank, per PitchBook

How it works: Freddy's offers the kind of speed you would find at a fast-food chain, but with all of its menu items made to order with high-quality ingredients, Dull says.

Its prices are also lower than its fast-casual rivals, according to Dull.

When one of its concepts moves into a new market, it tends to take share from chains like Wendy's and Jack in the Box, he says.

Zoom in: Freddy's keeps its menu streamlined so that kitchens operate efficiently and it's easier to train and retain employees.

What appeals to franchisees is Freddy's collects a 4.5% royalty rate, which is below the 6% to 8% competitors typically extract.

Zoom out: Freddy's had 518 restaurants at the end of 2023 after opening 62 locations last year, with about 90% of those franchise-owned and the rest company-owned.

This year it plans to open between 65 and 70, while next year that number will grow to between 80 and 90, with a clear line of site to 800 locations, Dull says.

In all, Freddy's has the potential to have more than 3,000 locations of its traditional restaurant format in the U.S., he says.

Burger chain Freddy's to weigh exit in a year

The company could either sell to another PE firm or IPO, which it's been preparing for.

Illustration of a burger stacked high with money

Initial public offerings (IPO)

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Freddy&#x27;s, a Wichita, Kan.-based burger and custard chain, will begin ramping up for a sale or IPO in a year, CEO Chris Dull tells Axios exclusively.Why it matters: Americans&#x27; <a class="gtmContentClick" data-vars-link-text="love of the classic hamburger " data-vars-click-url="https://www.franchisetimes.com/franchise_news/sales-climb-for-largest-burger-chains-top-400-data-shows/article_1c32590a-63c8-11ee-81ee-7b46e7eaf6ea.html" data-vars-content-id="c344f62c-8fa2-4736-ac4e-de1f2ea1fd40" data-vars-headline="Burger chain Freddy&#x27;s to weigh exit in a year" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.franchisetimes.com/franchise_news/sales-climb-for-largest-burger-chains-top-400-data-shows/article_1c32590a-63c8-11ee-81ee-7b46e7eaf6ea.html" target="_blank">love of the classic hamburger </a>continues <a class="gtmContentClick" data-vars-link-text="to support the growth of" data-vars-click-url="https://www.freddys.com/blog/how-freddys-plans-become-one-biggest-burger-concepts" data-vars-content-id="c344f62c-8fa2-4736-ac4e-de1f2ea1fd40" data-vars-headline="Burger chain Freddy&#x27;s to weigh exit in a year" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.freddys.com/blog/how-freddys-plans-become-one-biggest-burger-concepts" target="_blank">to support the growth of</a> both national and regional chains.

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Burger chain Freddy's to weigh exit in a year

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