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Burger chain Freddy's to weigh exit in a year

Illustration of a burger stacked high with money

Illustration: Sarah Grillo/Axios

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.
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