Smashburger CEO Sees Doubling Stores Before Potential IPO

Smashburger, a Denver-based burger chain, will expand to about 500 units in the U.S. in the next two to three years and may consider an initial public offering, Chairman and Chief Executive Officer Dave Prokupek said.

A U.S. IPO is “definitely a possibility down the road,” Prokupek said during an interview in Chicago today. “The idea of good food fast isn’t going to go away anytime soon.”

The closely held chain, which has about 200 domestic locations, competes with fast-casual restaurants including Chipotle Mexican Grill Inc. (CMG), Panera Bread Co. (PNRA) and Five Guys Burgers & Fries. Smashburger has been expanding to new cities in the U.S., as well as overseas in markets such as Panama, Canada and Saudi Arabia.

Consumer Capital Partners, also based in Denver, owns Smashburger, as well as restaurants including Tom’s Urban 24 and Live Basil Pizza. Smashburger sales will increase as much as 47 percent to $250 million this year from about $170 million in 2012, Prokupek said.

Many fast-casual chains, which typically sell pricier fare than fast-food restaurants, aren’t yet big enough to attract IPO investors who want chains with about 400 to 500 locations and $400 million in sales, Prokupek said. This year, Smashburger will open about 65 shops, he said.

Sales at U.S. fast-casual chains are outpacing the growth of other dining segments, according to data from Chicago-based researcher Technomic Inc. Revenue at fast-casual restaurants rose 13 percent to $24.2 billion last year, compared with a 4.6 percent gain for fast food, the data show.

Classic Smash

Smashburger, founded in 2007, sells hamburgers and chicken sandwiches, as well as salads and a veggie burger. A “Classic Smash” burger with American cheese is $4.99, while a larger version topped with avocado and bacon is $6.99, according to the company’s website.

The chain’s beef costs will be about 6 percent to 8 percent higher in 2013 than last year, Prokupek said. That compares to moderating prices for items such as potatoes and oils, he said. Smashburger locks in beef prices about 12 to 18 months ahead of time.

Smashburger raised prices by about 2 percent at the beginning of the year on items such as fries and drinks. The chain has never increased the $4.99 price for its basic burger at almost all of its restaurants. The exceptions are a few franchises in high-rent markets that have boosted the price to $5.19 or $5.29, Prokupek said.

The burger seller, which has stores in Kuwait and Costa Rica, is looking to expand to other international markets. Smashburger will open its first store in the U.K. in about two years and is talking to potential partners in Mexico, Prokupek said.

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