Jersey Mike’s didn’t have a strong IPO this week, which could affect the market. | Photo: Shutterstock.
This is from the weekly restaurant finance newsletter The Bottom Line. To get this in your inbox every Monday morning, click here.
Good luck, Inspire Brands.
Jersey Mike’s went public on Thursday, raising $1 billion in one of the restaurant industry’s biggest IPOs of all time. And public company investors greeted the company with a collective yawn. The stock declined 6%.
We took issue with the exaggerated pre-IPO hype, notably the report that the offering was 10x oversubscribed.
But the real problem is the poor reception, and what that means for restaurants. The industry is weird when it comes to IPOs. Companies only go public when they know conditions are exactly right. This results in long periods with few or no IPOs and then short bursts when everybody goes at once. It’s completely ridiculous.
Jersey Mike’s is (still) one of the best restaurant chains to go public in a long time. That it could get a reception like that could well spook other companies that are considering that route.
That’s not a good thing. The public markets and their investors need a healthy variety of investment options. Private-equity firms and other entities that buy such companies need a healthy IPO market to set valuations and provide an ultimate off-ramp.
Charlie Morrison, the CEO of Jersey Mike’s, now gets the benefit of apparently lowered expectations. But he will also be under pressure to perform, to get that price back up, because the investment bankers here did not get their job done.
As for Inspire, which is also planning an IPO this year — we assume that is still on the table — it should engineer its offering more carefully than Jersey Mike’s apparently did.
This week’s financial news
Cracker Barrel decided to change CEOs after all. One year after the logo controversy. With Dave Deno. Unreal.
Brian Niccol might have been worth it.
Also, Starbucks’ remodel pace is insane.
Apparently, $1 Mexican Pizzas can get people to stop thinking about cyclospora.
We should start questioning whether Wingstop’s aggressive unit growth is hurting unit economics.
The Cheesecake Factory wants more kids.
Noodles & Company. Damn.
What happens when a successful local publisher and retailer starts some restaurants? Nothing very good, apparently.
Number of the week
Wingstop’s same-store sales declined 7.5% last quarter. After two years with some of the strongest results in industry history, it has now seen results deteriorate in each of the past five periods. This shows those results on a two-year basis.
Quote of the week
“In short, we like what we’re seeing.” -Starbucks CEO Brian Niccol on the results from the company’s store remodels.
On the blog
I wrote about Jersey Mike’s, Cracker Barrel, and a publisher that got into restaurants. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive I spoke with Michael Davis about his interesting financing model. On The Week in Restaurants we talked Cracker Barrel, Jersey Mike’s, and Starbucks.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.
