Is the dearth of restaurant IPOs in 2022 finally coming to an end?
The time between when a company launches, grows and gets successful enough to file an IPO has increased significantly — numbers from Statista show that while the average number of years from initial venture capital funding was three in the year 2000, it had risen to six by 2021.
For California-based firms, the average number is between eight and 10 years after founding.
Of course, the exact number of years will vary significantly based on the type of company it is — given the abundance of similar options on the market, food chains generally take longer to grow large enough to go public.
Another Popular Fast Casual Chain to Go Public
While fast casual salad chain Sweetgreen (SG) – Get Free Report was founded out of Washington, D.C. in 2006, it did not go public until November 2021 when stock opened far above the initial public offering price of $26 at $52 per share.
A fellow fast casual competitor to arise out of Washington, D.C. (government workers must like their salad options) is Cava. The Mediterranean chain was founded by Greek immigrants out of Bethesda, Maryland in 2011 as a build-your-own bowl concept featuring different types of Greek spreads, dips, and toppings.
Prior to that, founders Ted Xenohristos, Ike Grigoropoulos, and Dimitri Moshovitis had tried launching full-service restaurants. The first one, Cava Mezze, opened in Maryland’s Rockville in 2006.
The pick-up concept ultimately proved to be more popular and the chain started growing quickly. As of September 2021, Cava’s valuation was estimated at over $1.3 billion. The chain was also aiming to have over 500 locations across the country by 2025. In 2018, it also acquired the public mediterranean chain Zoë’s Kitchen for $300 million and incorporated many of them into existing Cava concepts.
While Cava locations have been popping up fast in many U.S. cities, Cava remained a private chain throughout this time. On Monday, the chain committed to plans to change this as it filed for an initial public offering (IPO) with the Securities and Exchange Commission (SEC).
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This Is What Still Needs To Happen for Cava to Go Public
The chain is still very early on in a process that it has worked hard to keep confidential. The first step is for the SEC to review Form S-1 (the document first needed to announce that a company wants to go public) and issue guidance on how to proceed.
“The total number of shares to be offered and the price range for the proposed offering have not yet been determined,” the chain said in an announcement. “The offering is subject to market and other conditions and the completion of the SEC’s review process.”
If followed through, the IPO would be one of the first in the industry for a while now — while Sweetgreen, Krispy Kreme (DNUT) – Get Free Report, and Dutch Bros (BROS) – Get Free Report all went public in 2021, there have been no major moves in 2022 amid general post-pandemic market uncertainty.
Other IPOs widely-rumored to take place in 2023 include Brazilian steakhouse chain Fogo de Chão, Texas-based taco restaurant Torchy’s Tacos, and California Pizza Kitchen.
“The one thing that IPOs need is a stable environment,” Damon Chandik, who co-heads the restaurant industry branch at investment company Piper Sandler, recently told Restaurant Business. “[…] We’re clearly starting to see that environment turn more favorable. We’re currently seeing the volatility move down.”
