Roark Capital's $1 billion acquisition of Dave's Hot Chicken
- Agastya Jain
- Jun 14
- 10 min read
By: Tessa Folan
6/14/2025
Deal Overview:
Acquirer: Roark Capital
Target: Dave’s Hot Chicken
Sector: Consumer
Subsector: Restaurants
Transaction Size: $1 billion
Transaction Structure: 70% majority stake acquisition
Closed Date: June 2, 2025
Firm Overview:
Roark Capital (Acquirer): Roark Capital, founded in 2001, is an Atlanta-based private investment firm with over $40 billion AUM. Roark is focused on investments in the consumer and business service space, with a specialization in franchise and franchise-like business models. In 2023, Roark acquired Subway for over $9 billion, which joined their portfolio alongside two multi-brand platform companies: GoTo Foods (Auntie Anne’s, Cinnabon, Jamba, and more) and Inspire Brands (Arby’s, Buffalo Wild Wings, Dunkin’ and more). Roark also notably owns Culver’s, the Hardee’s and Carl’s Jr. brands, and Nothing Bundt Cakes.
Dave’s Hot Chicken (Target): Dave’s Hot Chicken began in 2017 as a pop-up in a Los Angeles parking lot when four friends pooled their savings ($900) to serve chicken tenders and sandwiches to their community. In 2018, they opened their first store, and just a year after that, an investor group led by Wetzel’s Pretzel’s co-founder Bill Phelps stepped in to expand the brand through franchising. Now with over 300 locations worldwide and an expectation to open 175 more this year, Dave’s shows no signs of slowing growth. In 2024, Dave’s recorded domestic sales of nearly $617 million, up 57% over the prior year. The core offerings have remained the same since the parking lot days, with Dave’s famous Nashville chicken, in six different spice levels and served in slider and tender form. That said, the company has expanded the menu slightly to include items like mac n’ cheese and milkshakes, and will continue to do so in order to boost sales and stay up to trend in a competitive market. Dave’s prides itself on a strong brand culture with unique and vibrant restaurant designs, major celebrity investments from Drake, Samuel L. Jackson, and Usher, and millions of active social media followers.
Dave’s Hot Chicken sold 70% of its business to Roark Capital, with the 30% remaining distributed amongst partners. Each of the four co-founders owned roughly 10% of the business prior to the sale and are collectively selling around 80% of their stakes, amounting to around $80 million pre-tax. Following the deal, Dave’s core management team will remain in place, which includes Phelps as CEO and Jim Bitticks as president and COO. Co-founder Arman Oganesyan will continue as chief brand officer and co-founder Dave Kopushyan as chief culinary officer. Bitticks puts it simply, “We’re all staying. Nobody is leaving. The goal is to keep it growing.” To ensure this commitment was felt company-wide, Phelps and the rest of his investment group voted to give away a portion of their earnings to create bonuses for support center employees down to store managers and assistant managers after the sale was made final.
Sector & Deal-Relevant Trends:
Private Equity’s Growing Appetite for Franchise-Based Models: Roark Capital has led the charge in the private market’s takeover of franchising companies through high-profile acquisitions of Subway, Dunkin', Arby’s, and more. But they’re not alone. In late 2024, Blackstone acquired Jersey Mike Subs for nearly $8 billion and Sycamore Partners bought Playa Bowls for approximately $300 million. These deals underscore private equity firms' interest in franchise operations for their predictability and scalability. With built-in recurring revenue streams through royalty-based models and franchise fees, the businesses provide a structure that is highly scalable and less capital intensive. Additionally, by passing off operational responsibilities and ownership to franchisees, the risk that a firm takes on is miitgated. This structure allows for accelerated growth while minimizing balance sheet risk. Franchising is also increasingly seen as an inflation-resilient asset class as the established brands come with pricing power, cash-on-cash returns, and limited capital expenditure relative to corporate-owned chains. As traditional consumer discretionary sectors face margin pressure, franchise-based quick service restaurant models are proving to be more resilient due to their ability to pass costs to end consumers and franchisees.
So, when private equity finds a brand they love—backed by strong unit economics and clear points of differentiation—pursuing the acquisition becomes a no-brainer. According to Dave’s founder Oganesyan, Roark has followed Dave’s journey since they had 15 stores, quoting that he “always felt like these guys could be our partners.”
As for the franchise industry as a whole, total output increased by 4.1%, from $858.5 billion in 2023 to $893.9 billion in 2024. This year, the number of franchise establishments is expected to increase by more than 15,000 units, or 1.9%, to 821,000 units. This growth is supported by expectations of lower interest rates leading to higher ownership affordability and as aforementioned, increased investment from private equity firms.
Dave’s Hot Chicken franchise model is similar to the industry standard. They have an initial franchise fee of $40,000, followed by an ongoing 6% royalty fee on gross sales and 5% marketing fee on gross sales, which covers national and local advertising efforts. This structure will provide Roark with reliable revenue streams while enabling scalable growth with minimal capital outlay and strong cash flow visibility.
IPO Uncertainty is Reshaping Private Equity Exit Strategies: Lately, the IPO market has faced downturns, representing only 6% of private exits by value. Once seen as a premium path to liquidity, IPOs are now viewed by many private investors as the channel of last resort. Ranked behind break-ups and minority stakes sales, IPOs are now often only relied on for assets that are too big to sell otherwise. This shift is rooted in several factors including market volatility, weak post-IPO performance, and longer holding periods.
In the broader macroeconomic environment, higher interest rates and persistent market volatility have created a challenging backdrop for pricing and launching public offerings. Many buyout firms have a record backlog of ageing and unsold assets, as the market conditions have made it harder to float companies or sell at acceptable prices. When firms do decide to go public, the recent post-IPO performance has been underwhelming. Several high-profile private equity-backed IPOs, like Allbirds, Sweetgreen, and Weber, have seen sharp declines after listing, which has harmed investor confidence and made public market exits even less attractive. As a result, many PE firms are holding onto assets longer than originally intended, stretching fund timelines and pressuring internal rates of return. In 2024, the median hold time was 6.1 years, up 17% from 2021. The combination of tough market conditions and disappointing public listings has pushed many firms to deprioritize IPOs in favor of more predictable exit options, or simply choosing to hold the company for a longer time.
Despite these market trends, Bitticks (President and COO of Dave’s), alongside Roark Capital, envisions a potential initial public offering within three to five years. Driven by Roark’s experience prepping brands for public markets, Dave’s Hot Chicken makes for the ideal IPO candidate as they are demonstrating rapid unit growth, strong average unit volumes, and a focused business model with scalable operations and broad consumer appeal. Bitticks hopes to model Roark Capital’s Wingstop plan, which they took public in 2015 when it had roughly 800 stores. Wingstop now has more than 2,200 stores and had double-digit sales increases in recent years. The stock itself has soared, up over 1,100% in the 10-year period. Ultimately, the IPO provided Wingstop with capital, exposure, and financial flexibility that has contributed to their growth and increased their value.
Can Hot Chicken Stay Hot?: In the past seven years, hot chicken and chicken sandwiches have surged in popularity. Originally gaining traction in Los Angeles through Nashville-style sandwiches and tenders, the phenomenon was quick to take over the country. In 2019, Popeyes, looking to capitalize on this trend, launched a chicken sandwich and called out Chick-fil-a in a bold marketing move. This led to what is known as the “chicken sandwich wars” and nearly all quick service restaurant chains introduced a fried chicken sandwich to their menus. The rapid boom led many analysts to predict a bust, with some dismissing the chicken sandwich craze as a passing fad. However, from 2019 to 2024 fried chicken sandwich consumption increased 19% at American restaurants, while burger consumption dropped 3%, emphasizing that the menu item is here to stay. Moreover, the higher quality Nashville chicken sandwich has outperformed the fast food standard underscoring consumers' appetite for bold, spicy flavors.
Projections, Opportunities, and Risks:
Dave’s Hot Chicken’s Product Quality and Growth Opportunities Earn Its Valuation: As mentioned above, one of the largest private equity franchise buyouts also came from Roark Capital through their acquisition of Subway. With over 37,000 stores worldwide, Subway sits alongside McDonald’s and Starbucks as one of the largest fast food chains in the world. However, when comparing Subway’s store count to Dave’s 315 locations at the time of acquisition and Roark’s respective purchase prices of $9.4 billion for Subway and $1 billion for Dave’s, the message is clear: store count alone does not determine valuation. Instead, private equity firms are focused on growth, quality, and unit economics— areas where Dave’s excels. Dave’s Hot Chicken is in a phase of hyper-growth, fueled by rapid sales acceleration and brand momentum. Although Dave’s only has around 300 locations, some of these franchisees report over $3 million in average unit volume (essentially average sales per store) with EBITDA margins between 18%-20%. Subway’s on the other hand, has an AUV in the mid-$400,000 range. Dave’s ability to drive revenue comes in part from premium positioning and focused menu, which allows for faster throughput and customer spending. Additionally, the brand has benefited from cultural relevance and social media virality. Its quality and flavors have led to immense word-of-mouth marketing, reinforcing brand loyalty. Remarkably, Dave’s has kept its original recipe 98% unchanged, preserving the authenticity that first attracted its loyal fanbase and encouraging repeat visits for the flavors that customers love.
Still, when compared to more direct competitors within the chicken industry, Dave’s sales are strong but not marketing leading: Chick-Fil-A averaged $9.3 million AUV at its free-standing and drive-thru restaurants in 2024, while Raising Cane’s reportedly hit $6.2 million in AUV. These brands, however, have had years to optimize their operations, saturate key regions, and leverage strong marketing campaigns. With the right operational support and continued focus on execution, Dave’s is well-positioned to narrow the gap in the years ahead.
Roark Capital’s Global Network and Experience Ability to Drive Dave’s Growth: Currently, Dave’s has sold the rights to more than 1,000 franchise locations in the U.S., the U.K., Middle East, and Canada. CEO Phelps envisions a world where Dave's could reach up to 4,000 locations worldwide over the next 10 years. For the Dave’s team, a big draw to working with Roark Capital is the firm’s international presence. With a portfolio spanning over 107,500 franchised and company-operated locations across 118 countries, the investment firm is well prepared to provide a scalable support system. Roark’s “Centers of Excellence” houses the firm’s developed internal capabilities in key areas like franchisee relations, supply chain optimization, real estate selection, and marketing, which it can share across its brands and can be readily applied to support Dave’s next stage of growth.
Additionally, the Asia market is seen as key to Dave’s potential growth. China alone has over 11,000 KFC restaurants, highlighting a large interest in fried chicken that Dave’s has the potential to grab a piece of. The region has been a proven market for American fast-casual and QSR brands, especially those offering bold flavors and unique brand identities. Concepts that bring originality—like Nashville-style hot chicken—tend to perform well, particularly with younger consumers seeking a differentiated experience. Dave’s vibrant branding, customizable heat levels, and social media-driven appeal align closely with what’s resonating in markets like South Korea, Japan, and Southeast Asia generally. In addition, as the middle class in this region continues to grow, so does the desire for higher quality food; Dave’s is positioned to be the perfect step up from the classic quick service restaurants that have previously dominated the space.
The team also hopes to be able to expand Dave’s Hot Chicken in non-traditional ways, adding units in airports, malls, and college campuses, which many of Roark’s brands do already. These high-traffic environments offer unique advantages for growth as there is lower customer acquisition costs, steady foot traffic, and strong brand exposure to new demographics. Roark’s existing infrastructure and relationships with national vendors and commercial real estate developers can help accelerate this rollout.
The Franchise Model Shields Dave’s from Economic Headwinds: Dave’s CEO confirmed that after agreeing to the deal initially in January, they rushed to close through a “truncated sales process” as worries of Trump’s tariffs and economic uncertainties began to surface. Although the Dave’s team’s belief in the company is strong, the ability to cash out was attractive and analysts point out “you need to sell when the concept is hot.” As consumer spending is tightening with steady inflation and high interest rates, there is pressure building on discretionary categories like fast-casual dining. Even brands with strong customer loyalty such as Dave’s are not immune to macroeconomic pressures as dining out is often the first thing people cut when their budget tightens. The real advantage for Dave’s (and now Roark) in this environment is their franchise structure. Because franchisees fund store build outs, the brand can scale without taking on heavy capital risk. It also decentralizes operational risk, with franchisees responsible for their store performance while Dave’s collects recurring royalties. This made Dave’s an appealing investment for Roark, combining high growth potential with limited downside risk and giving them the confidence to move forward while many firms in other sectors remain under pressure.
“This is one of the great entrepreneurial journeys of our time, and now we begin the next chapter in the story. Our entire organization is excited about the fit between Dave’s Hot Chicken and Roark, and we’re looking forward to continuing to blow our guests’ minds and unlocking growth and value for our franchise partners.”
- Bill Phelps, CEO, Dave's Hot Chicken
“The timing was absolutely right. We were at an inflection point where we could get an incredible valuation, and yet there was still significant upside for Roark, so that’s the perfect place to be. Roark has the ability to use their international supply chain to reduce the costs. And it’s a better deal for the franchisees, but they also have the international ability to grow with all of their franchisees around the world, so we have an opportunity to blow this thing up very quickly..”
- Bill Phelps, CEO, Dave's Hot Chicken
The bottom line...
Roark Capital’s $1 billion acquisition of Dave’s Hot Chicken represents private equity’s growing interest in franchise model companies for their scalability and predictable cash flows. Dave’s stands out within the industry for their strong brand and following, unit economics and expansion possibilities. With over 1,000 locations already sold and expansion opportunities in new markets and non-traditional real estate formats—assisted greatly by Roark’s experience in the industry—Dave's is positioned to become a global leader in fast-casual food. Although the IPO market has been sluggish, the team at Dave’s sees a potential for the company to go public in three to five years which could unlock greater access to capital, increase brand visibility, and provide a strong exit for Roark Capital.
