In November 2023, Sentinel Capital Partners quietly sold Newk’s Eatery to Beef O’Brady’s and Brass Tap parent company, FSC Franchise Co. While the acquisition was not well-advertised, Capital Spring-owned FSC Franchise Co. has been providing a breadth of resources for the fast-casual sandwiches and salads brands over the past eight months, Newk’s Eatery CEO Frank Paci said in an interview with Nation’s Restaurant News.
“Sentinel wanted to exit [their majority investment] because it was the last investment in their portfolio,” Paci said. “They took the opportunity to put the business out there, now that Newk’s has a growing top line and growing bottom line. At the same time, FSC had been looking to add to their portfolio for a long time. This seemed to fit right in with what they were looking for: they liked our positioning as a quality, fast-casual brand.”
Since joining FSC Franchise Co., Paci said that most of the immediate benefits have been financial and resource-driven. Paci said he has been working closely with Chris Elliott, CEO of FSC Franchise Co. to figure out resource sharing opportunities like construction, real estate, franchise sales, and purchasing. Under new ownership, Newk’s even had its first franchisee convention this year.
“As a portfolio company, there are a lot of duplicate resources that we could share and actually get better efficiency out of that,” Paci said. “Newk’s as a system was worth $220 million, and when you put it together with the rest of FSC, we're now worth $500 million in terms of purchasing power. We think there are still opportunities within the [profits and losses] for our franchisees and company stores to expand margins.”
Figuring out where Newk’s fits in with the rest of the FSC portfolio has been a unique journey, Paci said, because Beef O’Brady’s and Brass Tap are both full-service, alcohol sales-driven brands, whereas Newk’s is mainly a limited-service lunch eatery. However, the brands present opportunities for current franchisees to diversify their holdings and still stay within the same company:
“There might be a market with a couple of Beef o Brady's, and [the franchisees] don't really want to expand out of that market, but there could be an opportunity to open Newk’s in that same market as an example,” Paci said. “I think it just gives us a whole lot more resources to grow the business.”
Right now, Newk’s goal is to open three restaurants this year, though given the new resources the company has under new management, they could easily accelerate that pace in the future, up to 10 restaurants per year. Currently, Newk’s Eatery has more than 100 restaurants and Paci said, “there’s no reason why we should not be able to double this business if we get the right partners to do so.”
Beyond development momentum, Paci listed other goals as part of FSC Franchise, including improving operational efficiency, while not allowing quality to suffer. For example, before Paci arrived at the company, each Newk’s location sliced cheese by hand, and now employees use pre-sliced cheese. He also wants to take advantage of the company’s added purchasing power to get better deals on ingredients from suppliers.
“On the one hand, the different brands have different service models, but we're all buying tables and chairs, and we’re all buying shrimp and gloves,” Paci said. “If we’re buying gloves and they’re buying gloves, then if we combine the purchase, we might have a better price or we might switch to their gloves…. A lot of portfolio companies have overlapping brands, but we’re not overlapping in terms of what we’re offering, but we can serve guests within the same trade area.”
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