Intro to Fast Acquisition (NYSE:FST) SPAC
FST came online on August 2020 and is co-led by Sandy Beall and Doug Jacob. Specifically, they decided to seek out a restaurant brand with EBITDA between $40 and $150 M. Their focus is to allow a fast casual brand to thrive under their expertise and domain knowledge in the “emerging growth” subsector. They raised a half warrant per unit with a fairly traditional structure, with no surprises in terms of the format.
In total, they raised $200M to target a fast-food (QSR) or a fast-casual chain with a significant growth runway. In particular, they are focusing on an “iconic brand” with an enterprise value of somewhere around $600 million. More specifically, their seeking out restaurants with “small dining rooms” that utilize “an alternative way to get cuisine to the customer”. This focus was mentioned as a potential characteristic that would allow a restaurant brand to stand out. The use of third-party, native delivery, or other alternative methods of delivering food to the customer are all on the table.
Sponsor Reputation and Context
The CO-CEO’s of FST SPAC are Sandy Beall, founder of Ruby Tuesday’s, and Doug Jacob, co-founder of &Pizza. Jacob also pioneered JWALK and TORO restaurant. Its chairman is former Noodles & Co. CEO Kevin Reddy. Former ThinkFoodGroup CEO Kimberly Grant is the chief strategy officer. &Pizza CEO Michael Lastoria is an advisor. So is Kat Cole, the chief operating officer at Focus Brands. FST SPAC is the only restaurant niche SPAC to date.
Also on the team are Todd Gurley and Ndamukong Suh as special advisors. Granted investors are left asking why Gurley and Suh are involved at all. FST has acknowledged, it is because they have friends within the management team and can help market the SPAC once a deal is announced.
Beall Investments Background
Before we dive into Beall Investments, its worth digging into Sandy Beall a little bit more. Beall founded Ruby Tuesday – an American cuisine sit-down restaurant – and grew the chain to over 850 locations today. Although he retired, he continues to advise food service businesses through his investments. It seems that this may have been partially due to his age, but the tough environment for sit-down as well.
Beall’s investment vehicle targets innovative food service concepts with “Millennial” appeal. His current portfolio is Mexicue, &Pizza, Meatball Shop, Crave, Seamore’s, and Chow Daddy’s – see details here. We listed the exact traits they look for in an investment opportunity below.
- Well-Positioned, Millennial-based brand
- Chef-Driven, Fresher, healthier menu offering
- Local, clean food, sustainability focus
- Small space: 1,500-3,000 square feet
- High sales volume of at least $1,000 per square foot
- High customer value ($10 to $15 price points)
- Premium, Fast Casual service or Fast Full service system
- Alcohohlic beverage offering
- Unique feel, look, music
- Management Teams we like and trust
Based on the extensive repertoire in VC investing, the sub-sponsor team seems very capable in this niche. To get more context on &vest, you dig into their crunchbase profile, and their website. They consider themselves a “hybrid consumer brand VC / creative agency”, and have an interesting investment history. For one, they usually are the lead investors on small beauty / innovative dining deals. An example is Dirty Lemon Beverages, a drink brand that raised $17M that sells exclusively via text. Note that they could take their domain knowledge in innovative delivery to the table in FST Acquisition.
Potential Overlooked Targets for FST
Beall publicly stated that there are only 10 realistic targets for FST. We will dive into what we view may be potential acquisitions. Although the SPAC did state that they may look in “hospitality”, this is unlikely given Beall’s domain. That being said, they could engage in a hybrid investment. But, either way we think they will bring something innovative and digitally-native to the market. Potentially, they could do a technology / restaurant hybrid deal that would garner a ton of attention from the street. COVID-19 has also created a huge opportunity in the fast food/ casual dining space. This gap will be filled by large chains which were well positioned and creative going into the pandemic.
- &Pizza – Given the extensive involvement with the company (both sponsors invested) and valuation around $2.25B – this could be a quick option for a deal if nothing else winds up on the table.
- Raising Cane’s – with sales over $1.2 B in 2019, this chicken chain with a simple model of chicken fingers, fries, coleslaw, and toast could be a prime target for refinement under FST’s management team.
- Zaxby’s – the chain did a staggering $1.8 B in sales in 2019, and could be a target similar to Raising Cane’s for innovating in the chicken space.
- Blaze Pizza – One interesting thing is that Ndamukong Suh, Todd Gurley, and Lebron James have a very close friendship. James has a 10% ownership interest in Blaze Pizza. In 2019 Blaze Pizza’s CEO said the goal was to go public in approximately 3 years – which fits very nicely into FST’s timeline as well!
Deal Flow / Pipeline Analysis
What’s encouraging is Jacob (&Vest) saying “Given our connections on the management side and on the [private equity] side, we believe we can get a deal done in short order”. Beall trumpeted on interviews that the team’s goal was to get an acquisition done “Fast”. This may show that something may be in the works at the time of writing this article.
In their defense, both have private equity teams with significant deal flow in the restaurant space, which is an important box to check for SPACs. However, both have only participated in small deals. Thus, raising $200M means that they might have trouble courting a larger player like Five Guys. That being said, FST’s acquiree will be a prime focus for the years to come and spend a lot of time on operational / executional improvements.
Ability to Create Value Post-Deal
Sandy Beall’s experience with Ruby Tuesday and investing in growth stage restaurants is top-notch. That being said, we thought it would be interesting to dive a little further into Jacob of &vest. He first founded TORO restaurant in 2012 – an extension of a Boston Spanish tapas restaurant into NYC. The idea was a success, but had to shut down due to COVID-19. Using this experience, Jacob co-founded &Pizza out of DC to a valuation of over $2B today. It’s evident that Jacob has the experience to advise a growing restaurant chain as well. Therefore, the combination of &Vest and Beall should be able to do something very interesting operationally.
Summary of our Findings on FST
In summary, FST SPAC represents a relatively mediocre SPAC on the surface given the warrant structure and team. However, our conclusions show that Beall and Jacob are rockstars in the restaurant space. Thus, they may do something digitally native and compelling for SPAC investors. A great brand will trade up to a huge multiple given how peers like Chipotle and Wingstop trade. That being said, the group’s previous VC rounds much smaller ($10M-$50M) than their SPAC. In summary, FST SPAC is compelling for those interested in restaurants or the team’s innovative reputation.