When Sean Honey and Jeff Mills left the San Francisco private-equity group Weston Presidio in 2014 to start Main Post Partners, they were told their first round of fundraising would be difficult.
So it probably says something that Main Post raised $400 million, $150 million more than they had targeted.
Specifically, it says something about their investing track record with Weston, which includes restaurant chains like the fast-growing sandwich chain Jimmy John’s, the San Francisco-based giant franchisee Flynn Restaurant Group and the family-dining chain Snooze.
“Everyone told us it would be challenging to raise a first-time fund,” said Mills, managing partner with Main Post. “You have to perform over time. The companies in your track record have to perform, with good exits. You have to demonstrate the ability to deploy capital. We got to check all the boxes. We’re obviously happy with the way it turned out.”
Honey joined Weston Presidio in 1999, and Mills joined in 2005. They decided to leave when Weston decided against raising another fund. “We had a team working together for over a decade,” said Honey, also managing partner with Main Post. ‘We had a lot of success together, a lot of junior professionals. We had a whole team that wanted to work together, and Jeff and I were confident we could raise a good size fund.”
Main Post targets high-growth companies looking for investments of $25 million to $75 million. The firm targets the consumer sector, including the restaurant business, along with services and manufacturing.
The group is looking for “unique situations with great people, proven concepts built over time that are looking to choose their own partners,” Mills said. “We’re not the guys out there buying other private-equity firms’ companies.”
Nor will they necessarily join the fray of companies targeting chains with just a couple of locations, though they might start building relationships with those small growth chains so when they do go look for funding, they might target Main Post. “We meet with 3 to 7 unit companies,” Mills said, “because before you know it, it has 25 units and is legitimately within our target.”
The group is not afraid to target casual-dining companies, even though they acknowledge continued trends of consumers moving away from such chains. They helped invest in the breakfast-and-lunch family-dining concept Snooze, for instance.
“We’re not guys who say it’s impossible to build a company in casual dining,” Mills said. “A lot of our peers have sworn off the space.”
And they note that competition for high-growth chains in the fast-casual space is heavy — even though expansion prospect for such companies are limited.
Prices for real estate are high for those chains targeting 2,500- to 3,500-square-foot spaces. “Rents per square foot are the highest they’ve ever been,” Mills said. “There are going to be classes of stores with higher rent loads.”
Main Post looks to become “partners” with the companies they invest in, and Weston Presidio had a track record of investing in restaurant chains and sticking with them for years.
Honey, for instance, has been involved with Flynn Restaurant Group for 11 years. Weston has been a partner with Jimmy John’s for nine years. “We stay with it as long as we can,” Mills said.
The firm targets entrepreneurs who are looking to build companies, not just an exit strategy where they can cash out.
“We’re starting to hear a lot of people use the term ‘IPO’ as a verb, as in, ‘We want to go IPO some day,’” Mills said. “We like entrepreneurs who talk operations and talk culture. This is a hard thing to do. Every real-estate site matters. Everything needs to stand on its own.
“If you build a great business, the exit will come.”
They caution that some of the higher-valuation deals in the restaurant space make it more difficult for the investors to make money down the road. Their approach takes less pressure off the company to grow at break-neck speed.
“We like to say that if we can double a business over five years, we try to make it triple,” Mills said. “Deals priced at these levels, you have to quintuple the business over five years, just to make a double.”
Honey and Mills acknowledge that the restaurant industry is risky. “Restaurants is one of the higher failure rate industries in America,” Mills said. “It’s not easy to build a restaurant company.”
But they believe there remains growth opportunities in the industry and that their long-term growth approach works.
“There are pockets of growth in restaurants,” Mills said. “There’s a lot of creativity and innovation and new and interesting trends. The overall trend toward eating out remains positive.”
Contact Jonathan Maze at [email protected]
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