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On-demand meat. Walmart in biometrics. Barilla's beer bet. 
CB Insights celebration

Burger umbrellas

Hi there, 

Yesterday, Inspire Brands announced plans to acquire drive-in restaurant chain Sonic for $2.3B.



With the acquisition, Sonic joins a growing empire of US quick service restaurants (QSRs) controlled by PE firm Roark Capital.

(Roark formed holding company Inspire Brands in Feb'18 after facilitating Arby's $2.9B acquisition of Buffalo Wild Wings). 

We've mapped out Roark's current holdings below. The Atlanta-based firm tends to target mid-priced, mall-based fast food and fast casual restaurant chains, many of which use the franchise model. 



At the same time, as we've covered previously, Luxembourg-based holding group JAB has been snapping up major US coffee chains. Most recently in May, JAB acquired Pret A Manger for nearly $2B. 



And Roark's umbrella will only get bigger — Inspire Brands' CEO told the WSJ he aims to buy up to 10 chains. 

How will consolidation change the fast casual industry?

Roark's and JAB's target restaurants face major, structural threats, including:

  • Consumer shifts toward healthier food, bringing changes we discussed last week.
  • The decline of centralized shopping locations, which chains like Au Bon Pain (JAB) and Jamba Juice (Roark) have used to drive sales.
  • The rise of on-demand delivery, which creates a wedge between convenience-focused restaurants (which can more easily be replaced by delivery services) and experience-focused restaurants. It can be a tough squeeze in the middle — it was many of these mid-priced, mall-based, neither-fun-nor-easy retailers that went bankrupt in the retail apocalypse.
  • Chains are struggling to attract lower-income shoppers, even as spending at fast casual restaurants increases. The next recession could hit JAB and Roark hard.

To combat these challenges, we expect Roark to encourage tech and startup investments across its portfolio. 

Private equity is all about economies of scale, and vendors may now find it easier to expand from one Roark company to another. Potential partners could frame themselves as solutions for:

  • Driving foot traffic. Buffalo Wild Wings just partnered with fantasy sports platform DraftKings to develop an exclusive mobile app with cash prices. Gambling in particular is probably not a good fit for Roark's other brands, but the DraftKings deal could provide a case study for digitally-enabled, in-restaurant experiences.
  • Supporting efficiency. Will Roark encourage its restaurants and franchise owners to adopt tech more uniformly? Buffalo Wild Wings, for example, works with supply chain transparency startup FoodLogiq, and Jimmy John's has used inventory management startup Bluecart. Recently-funded restaurant tech startups that could be contenders include Planday, Appetize, and Cloud4Wi.
  • Shedding unhealthy brand images. We've seen plant protein startup Impossible Foods launch successfully in Shake Shack and White Castle. Further out, could Roark direct its companies to ride the wellness trend by partnering with meat substitute companies? (As we've previously discussed, promising traditional companies help with "wellness" can be a powerful sales tactic). 

CB Insights clients can search and filter though hundreds of other restaurant tech companies here

What do you think? Can Sonic, Arby's, Buffalo Wild Wings and others survive the next 50 years?

Stay hungry,

Zoe
@Zoe_Leavitt

Deal of the week

Indian startup Licious, a farm-to-table meat delivery service, raised a $25M Series C, bringing total funding to $39M. 

Licious operates a similar model to US startups CrowdCow ($9M raised, including from Ashton Kutcher) and Porter Road ($3.7M). Meanwhile, China's become a hotspot for fresh produce delivery startups, with major players like MissFresh ($1.4B raised) and UrFresh ($55M). 



Food safety is a major issue in both India and China — while of course the US has its own issues — and this crop of e-commerce startups promise freshness and reliability. 

Furthermore, after Walmart spent $16B to beat out Amazon for a majority stake in India's leading e-commerce platform Flipkart, other international grocery leaders may look to M&A to grow their presence in the segment.

Licious could be a juicy target. 

CB Insights Hits
 

The Wellness Economy: The Buzzy Trend Reshaping Everything From Personal Care To Real Estate

Wellness initiatives go far beyond the food and beauty; the trend impacts everything from the way gyms operate to how retailers design clothing to the development of smart cities. Check it out.
 

Walmart Patent Wants To Monitor Your Health & Stress Levels While You Shop

Walmart recently applied for a patent to put biometric sensors in shopping cart handles, monitoring people's heart rates as they shop. Find out why.

CPG News & Views

Notable deals

Watch your back. Forter, an AI startup offering fraud prevention tools for e-commerce, raised a $50M Series D. The company says it maintains a database of 175M+ identities to help it differentiate between real and fraudulent shoppers. 
FinSMEs

Beer waste. ReGrained, which uses the grains left over from the beer brewing process to make granola bars, raised a $2.5M seed deal. ReGrained aims to emphasize health and environmental sustainability. Blue1877, the recently formed venture fund of pasta giant Barilla, participated in the deal. 
PR Newswire




About time!
Morning Recovery, which makes hangover recovery beverages, raised $8M at a $33M valuation. 
BevNet

Helping online sellers. Indian e-commerce leader Flipkart acquired Upstream Commerce, which offers AI-powered pricing analytics tools to sellers. 
Economic Times


Recent news & perspectives

Alexa, pass the popcorn? Last week Amazon revealed plans to integrate Alexa voice control into 70 new devices, including microwaves. While previous smart home initiatives have tried and failed, Amazon's better positioned to succeed since it plans to use its devices as points of sale. 
Bloomberg

A pricey meal. Eater rounded up a list of all the foods impacted by Trump's tarrifs, ranging from coffee to octopus. As CB Insights' earnings transcript analysis tool shows, tariffs have become a major discussion topic for retail and CPG executives. 
Eater

From romaine to blockchain. Walmart began piloting blockchain programs last year, and now plans to expand its use of the technology. It will require all its lettuce suppliers to upload supply chain data to Walmart's blockchain platform, improving transparency and helping Walmart trace sources of food contamination more quickly. 
CNBC




And one more thing... 

Gastro Obscura dives into the grisly history of people eating gold. 

Check it out. 
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