It may not be entirely correct to call Cooper’s Hawk Winery & Restaurants a chain of restaurants, not in the traditional sense.
And that’s why the company was able to achieve a meteoric valuation in its sale agreement with Ares Management.
The private equity firm pays more than $ 700 million for Cooper’s Hawk, although a source said the price was closer to $ 800 million. That would give it a valuation multiple of between 23 and 26 times the company’s 2018 earnings before interest, taxes, depreciation and amortization (EBITDA), estimated at $ 31 million.
That’s a lot for a chain expected to end the year with just 41 branches in a handful of states.
This is probably the biggest contract of its kind for a small chain since Portillo, 38 units, grabbed $ 1 billion from Berkshire Partners in 2014.
Private equity firms usually avoid such overblown multiples, but they will pull the checkbook out of brands rethinking the restaurant industry. Cooper’s Hawk fits that definition, functioning more as a hub for wine lovers than a chain of restaurants.
Like Portillo’s, Cooper’s Hawk is another Chicago-area chain that boasts high-volume restaurants with a loyal customer base and a model that’s nearly impossible to replicate.
It’s also fair to compare Cooper’s deal to Fidelity’s $ 200 million investment in the Sweetgreen salad chain late last year. This investment gave Sweetgreen an astonishing valuation of over $ 1 billion.
American Cooper’s Hawk System Sales
Sweetgreen operated 90 locations at the time of the transaction, with unit volumes of approximately $ 1.9 million. But the brand sees itself as a “food platform” that embraces technology to put healthier food in the hands of its customers.
Cooper’s Hawk, like Sweetgreen, sees itself as a lifestyle brand and concept that has reimagined the definition of the restaurant chain. In this case, the engine of the Cooper’s Hawk bus is its wine club.
This club now has more than 400,000 members, making it the largest of its kind in the world.
This club has immense value to Cooper’s, making it a loyalty program on steroids. Members are “at the center of our universe,” said Cooper Founder and CEO Tim McEnery. McEnery will remain with the company and retain a significant stake in the company.
Customers pay $ 19.99 per month, which gives them a bottle of one of the company’s branded wines each month. This gives Cooper’s Hawk and its restaurants a recurring source of income that is scarce in the restaurant business.
These members almost always come to the restaurant for their wine, and most of them buy something else when they do.
Cooper’s Hawk has done a lot to provide an experience for these members, simply allowing them to pay for their restaurant vouchers with a signature and even working with other restaurant chains to allow them to bring their wine to these places.
It organizes trips and regularly hosts events for its members featuring celebrity chefs such as Marcus Samuelson and Tyler Florence.
These customers are also loyal to Cooper’s Hawk, visiting restaurants more frequently and hardly ever leaving the club – the average membership term is currently five years. The chain is only 14 years old.
Club members give the business some freedom to grow. It is not dependent on retail traffic for its clientele, so it does not need to locate near movie theaters or other retail areas.
These members have also helped propel the chain’s average unit volumes, which now exceed $ 9 million. Same-store sales have grown every year since at least 2009, according to documents seen by Catering company.
All of this helps give the brand strong returns and profitability. Its cash-on-cash returns exceed 50%.
Number of American Cooper’s Hawk units
Additionally, Ares will get a chain that currently operates in just nine states, meaning it has considerable growth potential. In other words, it’s about buying a business with a loyal customer base and a recurring source of income.
The lesson in all this? The restaurant industry is full of competitors, many of which operate in the same traditional way.
Companies that can find new models to serve customers and keep them coming back time and time again are reaping the rewards.