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Tuesday, February 4, 2025

Twin Peaks IPO: Is a Restaurant Rush to the Stock Market Brewing?

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The restaurant industry is watching closely as Twin Peaks, a sports bar chain, makes its debut on the Nasdaq, marking the first restaurant IPO of the year. This event serves as a crucial indicator of the health of the IPO market, particularly for consumer-facing businesses, which has been sluggish due to factors like inflation, higher interest rates and cautious consumer spending. The success or failure of Twin Peaks’ IPO could significantly influence other restaurant companies considering going public, including established players like Panera Brands and Inspire Brands. This article explores the factors influencing Twin Peaks’ IPO and examines the prospects of other major restaurant companies hoping to follow suit.

Key Takeaways:

  • Twin Peaks’ IPO is a significant event, testing the waters for other restaurant companies considering going public after a period of market inactivity.
  • The success of Twin Peaks’ IPO and other recent IPOs, such as Smithfield Foods (which failed to impress, seeing its shares drop by 7% on its debut), will significantly influence others’ decisions regarding the public market.
  • Several major restaurant chains, including Panera Brands, Fogo de Chao, and Inspire Brands, are closely monitoring the market and could potentially launch their own IPOs in the near future, depending on market conditions and other internal factors.
  • Economic factors such as inflation and consumer confidence play a significant role in determining the success of restaurant IPOs, further underscoring the need for caution within this sector.

Twin Peaks’ Risky Debut: A Test of Market Sentiment

Twin Peaks’ entry into the public market is being seen as a crucial litmus test for the restaurant sector. The IPO market, particularly for consumer companies, has been notably tepid for several years. Soaring inflation, higher interest rates, and cautious consumers have created an environment of uncertainty, leading to lower valuations and increased reluctance for companies to go public. Even recent successes, like Cava’s IPO, haven’t been enough to completely reignite the market.

However, there’s a growing sense of optimism for a potential thaw in the IPO market. Nick Einhorn, vice president of research for Renaissance Capital, notes that “Last year was a stronger year than 2023, and we’re expecting 2025 to have more IPOs than 2024. That could certainly include more consumer IPOs.” Yet, the recent performance of Smithfield Foods, another consumer company that went public recently, casts some doubt on the market’s readiness for new entrants. Smithfield’s debut saw a 7% drop in its share price, raising concerns about the current market perception of the consumer sector.

Twin Peaks, while aiming to capitalize on the potential revival, faces its own set of challenges. As a relatively small chain with approximately 115 restaurants, its estimated equity value of $1.04 billion to $1.28 billion doesn’t exactly project unwavering confidence. Further complicating matters is the fact that it’s being spun off from Fat Brands, a company whose chair, Andy Wiederhorn, is facing criminal indictment for an alleged $47 million loan scheme. While both Wiederhorn and Fat Brands deny the charges, the negative publicity might cast a shadow on Twin Peaks’s debut.

Panera Brands: A Stalled IPO?

Panera Brands, the parent company of Panera Bread and Einstein Bros. Bagels, has been attempting to go public for several years. JAB Holding, its previous owner, had been looking to divest its ownership after its acquisition had turned Panera private way back in 2017. Although Panera had previously engaged in discussions with Danny Meyer’s SPAC (Special Purpose Acquisition Company) in 2021, this deal ultimately fell through due to unfavorable market conditions. After filing confidentially in December 2023 to go public, the leadership transition just earlier last month leaves the future of its IPO uncertain.

Challenges Facing Panera

Recent setbacks, including the highly publicized controversy surrounding its Charged Lemonade and the consequent multiple wrongful death lawsuits (that resulted in Panera having to settle with some plaintiffs), combined with a recent CEO resignation and the ongoing broader industry pullback amid increased consumer preference for home cooking, present significant hurdles for Panera’s IPO ambitions.

Fogo de Chao: A Wait-and-See Approach

Fogo de Chao, a Brazilian steakhouse chain, was also previously looking at launching an IPO attempt earlier in 2021. Having filed to go public but ultimately missing the opportune window, it is now backed by Bain Capital. This financial support has allowed Fogo de Chao to take a more measured and patient strategy when deciding its IPO approach. While the chain has ambitious expansion plans, with the intent of adding 15 more restaurants this year and over 100 restaurants globally already, its CEO, Barry McGowan, emphasizes the company’s desire to enter the market under favorable conditions and not rush into an IPO. He even joked about the exhaustive paperwork previously completed in repeated filings, highlighting the desire for a smoother and more predictable entrance onto the market this time.

Inspire Brands: A Giant in the Wings

Inspire Brands, a restaurant conglomerate owned by Roark Capital, boasts a vast portfolio of well-known brands, including Arby’s, Jimmy John’s, Sonic, Buffalo Wild Wings, Dunkin’, and Baskin-Robbins, making it a significant force in the restaurant industry. With its immense size and brand recognition, Inspire Brands was rumored to be seeking a $20 billion valuation in early-stage IPO discussions almost a year ago. However, progress on this front has seemingly stalled. Despite the slowdown, Inspire is still listed among the potential candidates for IPOs in 2025 which shows the expectation and potential for this market segment to revitalize later this year.

Inspire Brands’ Stable Leadership

In contrast to some of its competitors facing leadership changes, Inspire enjoys a stable leadership team with a CEO who has been steering the company since 2018. This stability might prove to be a key advantage if it decides to proceed with its IPO plans. The experience of its CFO, with time spent at Dunkin’ during its own IPO, also suggests it’s better prepared for a smooth transition into public markets.

In conclusion, Twin Peaks’ IPO is much more than just a single company venturing into the public market; it’s a significant indicator of the health and direction of the restaurant sector and the overall IPO market. The performance of Twin Peaks, combined with the evolving situations of other major players like Panera, Fogo de Chao, and Inspire Brands, will significantly shape the future landscape of the restaurant industry and pave the way for growth or continued hesitation within this sector. The next few months, and indeed this year, will be crucial in determining whether this recent IPO debut will spark a surge in restaurant-sector entries into the market or push the process further into the future.

Article Reference

Brian Johnson
Brian Johnson
Brian Johnson covers business news and trends, offering in-depth analysis and insights on the corporate world.

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