A Rare Partnership Reaps Benefits for Tender Greens


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No one we talked to recently could remember a private equity firm and a strategic investor banding together to invest in another restaurant company.

”It’s the first time I can recall,” declared Brookwood Associates Managing Director Jeb Ball, who represented shareholders in the tender offer.

“I can’t think of an example,” declared a former restaurant executive closely allied with a private equity firm.

“It does happen, though not that often,” noted a private equity executive active in the restaurant space, failing to cite an instance.

Yet it transpired last month when Alliance Consumer Growth and Union Square Hospitality Group, acquired a minority interest in 18-unit Tender Greens, founded in 2006. Terms were not announced.

The Los Angeles-based fast-casual concept, which describes itself as “fine-casual,” operates 18 units in southern California, each of which reportedly rings up $3.9 million annually. The chain does not franchise. 

Union Square Hospitality Group owns and operates 11 fine-dining restaurants in New York City, including Michelin-starred The Modern. To boot, CEO and best-selling author Danny Meyer founded publicly traded fast-casual Shack Shack (NYSE: SHAK) in 2004.

Typically, private equity firms maintain a roster of executives — known as operating partners — who individually assess, mentor and troubleshoot portfolio companies. The executives often invest in these companies. 

Asked why ACG didn’t use an operating partner, Managing Partner Josh Goldin cited the many resources to which Tender Greens now has access. “There’s no playbook,” he conceded, “but it’s a minority deal, meaning Union Square is not running Tender Greens.” 

Goldin explained that raising capital, in any case, wasn’t Tender Greens’ founders biggest concern. Eric Oberholtzer, Matt Lyman and David Dressler were seeking help to maintain the company’s affordable fine-dining positioning and culture as the chain grew, to date through self-funding. 

“The companies will eventually connect almost as sister entities, collaborating and sharing best practices. That’s unique,” Goldin added. 

Observers praised the unusual structure. “If I’m a private equity group looking to invest, I now have a wider selection of candidates if I can consider injecting a team of people rather than one individual,” strategic advisor Jim Parish offered.

“From Alliance’s perspective, they get the benefit of Shake Shack’s experience, both as a large growth company that has made all of the decisions that Tender Greens will have to make with respect to growth,” said the private equity executive. “So, they give Tender Greens a real leg up in mitigating the risks associated with growing a brand.”

ACG (not incidentally) is Shake Shack’s fourth largest shareholder. The firm has had a relationship with the Union Square Hospitality Group for several years. “The partnership would not have worked if we hadn't known Union Square before,” Goldin said. 

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