While some restaurants have been hit hard by the coronavirus pandemic, one venture firm is making a $90 million bet on the industry.
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Salt Lake City-based Mercato Partners has formed its inaugural food and beverage fund to invest in profitable restaurants looking to scale.
Mercato Partners’ Managing Director Greg Warnock has partnered with restaurant industry veteran and former tech executive Andrew Smith to launch the fund, dubbed Savory. Their goal is to fill a void in the food and beverage industry “by delivering access to growth capital” as well as provide advice from people with years of experience in scaling other restaurant concepts.
In 2008, Smith noticed that despite the economic downturn, many restaurants were still performing well.
“Restaurants were filled to the brim, and lines still out the door during the 2008 crash,” he told Crunchbase News. “Even when the market’s down, people still have to eat.”
Smith then founded Four Foods Group, a restaurant operator that ultimately grew to running 175 locations with more than $1 billion in revenue. Smith said he treats growing concepts similarly to growing startups.
That 50-plus person team is now part of Savory, helping restaurant owners with things like real estate selection and negotiation, development and construction of each restaurant location, and project and event management, among other things.
The fund will write initial checks of $5 million to $10 million, Smith told Crunchbase News.
“We buy the equity from them and the founders take it off the table to de-risk themselves,” he said. “Then we’ll provide an additional $5 million to $10 million for growth.”
Savory plans to invest in seven to nine concepts out of the fund. So far, it’s already put money into three: Mo’Bettahs, R&R BBQ and Swig.
Profitability, as well as resiliency, is a requirement.
“A lot of brands have been compromised over the last three months due to COVID. But a lot have innovated through this and are doing just fine,” Smith said. “Those are the brands we are really intrigued with.”
Illustration: Li-Anne Dias