Just Salad’s appetite for PE investment increases during pandemic, CEO says

Just Salad, a fast-casual healthy restaurant chain, is increasingly interested in selling a minority stake to private equity for more capital due to the novel coronavirus pandemic, CEO Nick Kenner said.

Kenner told AdWeek in January that the 44-unit New York City-based chain plans to explore a private equity deal or an IPO within 24 months. For this report, Kenner said the timeline for a private equity deal has stayed the same.

A deal with a private equity firm would be a minority stake worth at least USD 10m, the executive said. The capital would be used for scaling the business after the pandemic. He said he believes Just Salad is well-capitalized enough to survive the pandemic at least through the end of the year, though he noted there are many unknowns surrounding the crisis and its effects on the business.

“We’re certainly more open to doing a deal now than we were prior because we do feel that coming out of this, having more capital in the restaurant industry is going to be a major advantage,” he told this news service on Wednesday (20 May).

Ideal firms Just Salad would partner with are those with a technology focus or a technology background because the company has planned several tech-based initiatives, Kenner said. Just Salad has been approached by several private equity firms, both before and during the pandemic, he noted.

During the pandemic, it launched Just Grocery, which was originally for its employees who did not want to shop at grocery stores for fear of being infected. It is now available to the public, selling and delivering groceries the company buys from its existing farming and distribution partners, Kenner said.

Kenner said he is interested in expanding into several more markets. Currently, Just Salad has locations in greater New York City, Chicago, Florida, North Carolina, Philadelphia and Dubai. He does not expect any more to open this year or to sign any new real estate leases. The executive noted that post-coronavirus there likely will be attractive real estate at reasonable rates and lower construction costs.

Kenner and co-founder Rob Crespi founded Just Salad in 2006. It offers healthy food options with the goal of reducing waste and using humanely and organically raised livestock and produce. Panda Restaurant Group bought a 33% stake in Just Salad in 2016, and it has yet to have a private equity, venture capital or institutional investor. Kenner remains a principal owner of the company, with Laura Pensiero, the chef who designed the menu, and several other individuals also owning a stake.

Just Salad has temporarily closed about half of its locations and the rest switched to take-out and delivery due to local restrictions. Sales at open units in areas with a cluster of offices are down 50% to 80%, Kenner said. At locations in residential areas, sales are down 20% to 40%.

It has furloughed or laid off an undisclosed number of its roughly 1,000-person workforce, Kenner said. He hopes to hire back all employees, but the timeline of that is undetermined because of COVID-19.

He added that the company has not yet had to tap its revolver nor has it applied for government stimulus money. However, it has had to renegotiate leases with some landlords, who have mostly been receptive to amending leases, Kenner said. It made more than 20 procedural changes to encourage social distancing at its open locations, and it has implemented numerous cleaning benchmarks.

Though he declined to disclose revenue, he said 1Q20 saw significant growth, the second and third quarters will be “horrible,” and “Q4 is a huge question mark. We’re hoping for the best but prepared for the worst.”

by Alan Burdziak
Mergermarket

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