Growth fund Mercato Partners launches $90 million Savory Fund to develop emerging fast-casual brands

Managing director Andrew Smith, former CEO of Four Foods Group, said Savory is filling a gap in private equity investment.

Over 12 years at Four Foods Group, Andrew Smith built an empire of food and beverage brands that generated about a billion dollar in sales at 170 restaurant locations across the country.

But despite the success of Four Foods and its portfolio of restaurants, the former CEO noted one flaw in the system: private equity investment. Too often, firms invested in high potential brands to scale them quickly, but without giving them any guidance on how to grow responsibly.

“There was always a big disconnect between money and experience in the industry,” Smith told Nation’s Restaurant News in an exclusive interview to announce his latest project.

Smith is now the managing director of Savory Fund, a new division of Salt Lake City-based growth fund Mercato Partners. Savory, which formed before the pandemic, has raised more than $90 million in funding to invest in emerging ”high potential” concepts with three to seven units.

Smith said Savory is focused on growing upscale fast-casual brands to about 25 to 35 units. But once Savory invests, it doesn’t plan to walk away.

The fund’s investment comes with leadership guidance from industry veterans from Four Foods Group.  The team will assist Savory’s portfolio of brands with real estate selection and negotiation, leadership training and development, supply chain/procurement, human resources, accounting, strategic financial planning, facilities management and sales and marketing.

Savory’s first three growth brands include Mo’Bettahs, R&R BBQ and Swig, which were previously under the Four Foods Group umbrella.  The company plans to announce its first new investment in the coming weeks.

Mercato initially planned to announce the  formation of Savory prior to the pandemic, but it held off because the timing didn’t seem right, Smith said.

Did the pandemic change Savory’s investment strategy?

Yes, and no, Smith said.

“I think that the football field is still the same — three to seven unit operators,” he said. “Unfortunately, I believe that a lot of those brands that we would have looked at pre-pandemic probably aren’t going to make it because they’re not well capitalized, or they weren’t prepared for something like this.”

Savory was in talks with two brands, but put the pause button when the pandemic hit.

It allowed Smith and his team to “see how they would weather the storm along with everybody else,” he said.  

Unfortunately, both brands are on shaky ground, unable to pivot fast enough when the pandemic hit. One of the brands had to permanently close some of its restaurants.

As such, Smith said Savory tweaked its original criteria. The fund is still scouting for emerging concepts with scalability, strong flavor profiles, a limited menu and a strong digital business.

However, Savory has narrowed its focus to fast-casual brands, specifically “polished” or “luxe” brands that offer counter service and bring food to your table. Those brands typically serve beer and wine, as well. He’d also like a brand that can expand its reach through ghost kitchens, a rapidly growing sector amid the pandemic.

Casual or fine dining restaurants are not in the cards in a post-pandemic era.

“I think casual dining is a little bit of a spooky place to be,” he said. “I think for everybody that has casual dining, we’re trying to figure out how quickly they can convert things to fast casual, and they’re going through that conversion.”

Savory is also looking at brands with strong digital businesses that allowed them to shift quickly to mobile ordering, delivery and curbside pickup when the pandemic hit. Great to-go packaging also helps.

“That’s a big deal for us,” Smith said. “That is going to be what the future is.”

Kimo Mack, co-founder of Mo’Bettahs, said the brand is not only reaping the benefits of Savory’s investment but its expertise in growing brands.

“We had reached a plateau in our expansion efforts,” Mack said in a statement. “We were stretched thin and being pulled away from our core strengths. The Savory team helped us to achieve a breakthrough in performance and together we quickly grew our business to heights we simply couldn’t have reached on our own.”

Mo’Bettahs has 13 locations with four more expected to open soon; Swig has 20 locations with 11 more in the works; and R&R BBQ has nine locations with plans to open two more soon.

 

By: Nancy Luna