Freddy’s Frozen Custard & Steakburgers and its private equity owner are working with two investment banks to consider a sale of the brand, Freddy’s CEO Chris Dull confirmed this week.
Freddy’s hired William Blair, a Chicago-based firm, and is working with North Point Advisors out of San Francisco to evaluate a potential transaction, though Dull stressed Freddy’s is not on the market.
When Thompson Street Capital Partners acquired Freddy’s in March 2021, the burger chain had 380 restaurants. With its 40 openings this year, it crossed the 550-unit mark, growth of more than 45 percent. It’s closing in on $1 billion in systemwide sales after finishing 2023 with total sales of $925 million, according to Franchise Times Top 400 data.
System sales increased 72.5 percent between 2019 and 2023, and last year grew 14.5 percent. The systemwide average unit volume was $1.9 million in 2023. That’s up from $1.79 million in 2022. Franchisees operate 94 percent of the restaurants.
Based in Wichita, Kansas, Freddy’s was founded in 2002 by brothers Bill and Randy Simon with friend and business partner Scott Redler. It’s named for the brothers’ father, Freddy Simon.
Thompson Street, said Dull, has been “an absolute pleasure to work with.” As a private equity firm, he continued, “they’re in the business of buying and selling companies,” and as the four-year anniversary of the partnership approaches, “I think we’re in that natural timeline of when you see brands transact.”
“I think it’ll be a great thing for Freddy’s,” said Dull, who joined the company as CEO in May 2021. “We’ve done well, and I think that the groups that will be interested in acquiring a business like this are groups that probably have tremendous experience in this space and can really help, you know, bring that next level of value add. And so I’m excited for that possibility, and I think it’s very real.”
Joe St. Geme, a managing director at St. Louis-based Thompson Street, declined to comment on a potential transaction but said the firm “had really high expectations” when it bought Freddy’s, “and it’s exceeded them.”
Technology investments, particularly in a mobile app and the brand’s loyalty program, are yielding strong results, St. Geme said, and Freddy’s has a sold-not-open pipeline of more than 500 units. It’s a real pipeline, he continued, not just numbers on a spreadsheet representing locations that won’t ever open.
“We have a pretty clear path, just based on our existing franchisees continuing to do what they’ve always done and opening on schedule,” said St. Geme as he noted Freddy’s is made up almost entirely of multi-unit franchisees capable of executing on achievable development agreements.
Regarding the possibility of a sale, Dull said he and his team continue to have open communication with franchisees and company employees.
“What I’ve told the team here is, if we’re doing our job and we’re doing it well, there will always be scuttle about Freddy’s,” he said. “If no one’s talking about us, then we’re probably not doing a very good job.”
Notable restaurant M&A transactions this year include the sale of Tropical Smoothie Cafe to Blackstone and the finalization of Subway’s sale to Roark Capital. Blackstone will add to its restaurant portfolio in early 2025, when it expects to close on its purchase of Jersey Mike’s Subs.
Sycamore Partners, which owns education franchise The Goddard School, bought acai concept Playa Bowls in the fall, and Butterfly Equity sold Modern Market Eatery to the brand’s first franchisee.
Coming up: Franchise Times will have more on the Freddy’s growth story in its February 2025 issue.