For years any news story covering a private-equity deal in foodservice most likely included Bruckmann, Rosser, Sherrill & Co., Sun Capital Partners Inc., or Thomas H. Lee Partners. Those large groups bought or sold some of the biggest brands in the restaurant space, including Corner Bakery, Boston Market and Dunkin’ Brands. 


Fast-forward 10 years from now, and a new crop of funds may be leading the pack. Several young private-equity companies, such as Rosser Capital Partners, Nourish Capital and D Cubed Group LLC, are zeroing in on restaurant investments.


While the funds themselves may be new, the names behind them are not. Among them are Harold Rosser, the veteran private-equity player who co-founded Bruckmann, Rosser, Sherrill; Sid Feltenstein, a longtime chain restaurateur and board member at Roark Capital; and Glenn Kaufman, who spent 11 years at American Securities Capital and serves on the board of directors at Red Robin Gourmet Burgers Inc. 


Each is actively looking to find — and invest in — the next great restaurant story.


“What you see now are offshoots, people hanging their own shingle, branching out and starting with a smaller fund,” said Mark Saltzgaber, a restaurant industry advisor who has worked on private-equity deals, including those for Jimmy John’s, Pinkberry and Au Bon Pain.


A lot of the activity comes from the explosion in the private-equity sector itself during the past decade, he said, as well as greater recognition of private equity as an asset class. The restaurant industry is no stranger to private-equity investments and ownership, as deals in the space exploded during 2005, 2006 and 2007, and began picking up steam again last year. 


“The market is still pretty good, so you’ll see more,” Saltzgaber said.


For Rosser, an opportunity to have his own investment vehicle and dive deep into the industry he’s focused on for two decades was a longtime goal. He has not lost his level of excitement for the industry, or for finding that perfect investment that pays shareholders handsomely.


“What’s exciting are the new concepts that are potentially the Chipotles of tomorrow,” he said. 


Customer requirements have changed, he noted, and restaurants are now expected to provide more value, better food and better service. 


“To deliver that consistently is a challenge, but is also part of the excitement,” he said. 


Greenwich, Conn.-based Rosser Capital will be focused primarily on the restaurant space, a differentiating point from broader private-equity firms, Rosser noted. He plans to focus investments in the casual-dining or fast-casual segments and to look for either new potential growth brands or companies that may have been neglected for one reason or another. Rosser would not detail the size of the fund, nor possible investment criteria. 


“We’ll find more opportunities and serve the companies we’re working with better by being specialized,” he said. “We’ll bring operational and strategic benefits to the table. Having done this for a long time, we’ve seen a lot and we don’t panic.”


Looking to serve small, emerging brands, San Francisco-based Nourish Capital is a new venture from Feltenstein and managing partner Brad Klapper, who hails from Clydesdale Ventures, a boutique investment firm. 


Nourish Capital is looking to serve almost as a venture-capital firm, working as the bridge between financing for one or two units, and financing through debt and equity for real growth. Klapper said that a typical Nourish Capital investment would focus on restaurant concepts with between two and 10 units, between $3 million and
$5 million in revenue, and
EBITDA of $1 million and below. 


“We’re filling the void between ‘friends and family’ capital and institutional capital,” Klapper said. “How does an entrepreneur go from point A to point B? We’ll bring both the capital and expertise.”


Like Rosser, the partners at Nourish Capital see a shift occurring in the restaurant industry based on the demographic, economic and cyclical changes across the country. Fast-casual brands, Klapper and Feltenstein said, can take advantage of those changes, making them a hot growth segment.


“Early-stage groups today will be the large groups of tomorrow,” Klapper said. 


Like Rosser and Feltenstein, Kaufman is no stranger to restaurants and their relationships with private-equity firms. At American Securities Capital, he worked on the deals involving El Pollo Loco and Potbelly — both of which are typically labeled as among the most successful in the industry. 


For his launch of D Cubed, based in New York, Kaufman established a partnership with restaurant veteran Phil Hickey, who was chairman and chief executive of Rare Hospitality International Inc. until its acquisition by Darden Restaurants Inc. Hickey has also served as a consultant and as a director on several boards.


D Cubed is a high-net-worth-focused private-equity firm concentrating on a select group of sectors, one of which is foodservice and restaurants.


“The foodservice industry is in a constant state of evolution, with new concepts taking share and pre-existing concepts needing to redefine to stay relevant,” Kaufman said. “Opportunities live in worlds of change.”


Contact Sarah E. Lockyer at sarah.lockyer@penton.com.