By TELIS DEMOS
Investors seeking high-growth consumer-facing companies have been hungrily eyeing a potential Smashburger initial public offering. They may need a snack to tide them over.
Smashburger has ‘enough money for two or three years’ or more of expansion, according to David Prokupek, CEO of the burger chain.
The Denver-based burger restaurant chain has secured a $35 million debt facility from Golub Capital, GBDC -0.80% an investment firm that specializes in making loans to middle-market companies. That funding, plus money previously raised and cash generated by the business, gives the chain “enough money for two or three years” or more of expansion, according to chief executive David Prokupek.
The company has been widely touted among bankers as a candidate for an initial public offering, and some investors may be salivating if another IPO of a Colorado-based “fast casual” chain, Noodles & Co., is a big success. That IPO, which could raise up to $92 million, could begin trading this week.
Mr. Prokupek said that while an IPO for Smashburger remains an option in the longer-term, the company is focused on adding 50 to 60 locations in 2013, with an eye toward getting to 400 to 500 total in three years.
“Investors are looking for restaurants that are stealing market share,” said Mr. Prokupek.
He said the chain was wary of growing too quickly, and was mindful of the multi-decade time horizon that it took for other chains to grow profitably to thousands of locations.
Smashburger is one of a number of fast-growing private companies that have, in one way or another, found ways to put off going public.
Companies such as online-ticketing company Eventbrite Inc. and web-survey company SurveyMonkey, have raised late-stage private capital from public investors.
An IPO of Noodles, which has 343 restaurants, according to its prospectus, would follow a handful of successful offerings in that industry last year, including Tex-Mex restaurant chain Chuy’s Holdings Inc. CHUY +2.13%
Some of Smashburger’s cash will go toward opening corporate-owned locations in big metropolitan markets, said Mr. Prokupek. Smashburger also is rolling out its first national television ad campaign, which will air in several markets over the summer, and is starting to offer regional craft beers.
Icon Burger Development Company LLC, the corporate parent of Smashburger, was founded in 2007 with money from private-equity firm Consumer Capital Partners. The firm, where Mr. Prokupek is managing partner, has invested $50 million.
Smashburger has grown to more than 200 locations, spanning 30 U.S. states and Canada, Kuwait, Saudi Arabia and Costa Rica.
The chain operates in the “fast casual” category also occupied by Panera Bread Co. PNRA +0.18% and Chipotle Mexican Grill Inc., CMG -0.95% which offer a dining experience somewhere between fast-food and sit-down.
It faces competition from other “better-burger” restaurants such as Five Guys Holdings LLC, which also is expanding nationally, and California-based In-N-Out Burgers.