Dallas-based private equity firm Centeroak Partners has made a significant move in the restaurant sector with its acquisition of Wetzel’s Pretzels, the popular snack chain. The deal, finalized on Thursday, marks a new chapter for Wetzel’s Pretzels as they transition from their previous ownership under Levine Leichtman Capital Partners.
The acquisition sees CenterOak Partners taking a majority stake in Wetzel’s Pretzels, signaling a strong belief in the brand’s continued growth and potential. While specific financial details of the investment remain undisclosed, Wetzel’s Pretzels CEO and co-founder, Bill Phelps, described it as a “very large equity investment.” Phelps himself is set to remain at the helm and will continue as a significant individual investor, ensuring leadership continuity for the pretzel chain. This stability is a key aspect that Wetzel’s Pretzels leadership emphasized as a positive factor in choosing CenterOak Partners.
For CenterOak Partners, Wetzel’s Pretzels represents a notable addition to their investment portfolio. While CenterOak has previously invested in casual dining chains like Cheddar’s, Wetzel’s Pretzels appears to be their sole current venture in the restaurant chain sphere, according to their website. This acquisition suggests a strategic interest from CenterOak Partners in expanding their presence within the focused service restaurant segment, recognizing the strong performance and growth potential of brands like Wetzel’s Pretzels.
The timing of the acquisition coincides with a period of robust performance for Wetzel’s Pretzels. The 310-unit chain is experiencing a successful year, with same-store sales increasing by 6.5 percent year-to-date. Wetzel’s is projecting impressive systemwide sales of $165 million for fiscal year 2016. This positive momentum is further underscored by Wetzel’s Pretzels’ recognition as a “Next 20 brand” in the Nation’s Restaurant News Top 200 census, highlighting their 12 percent domestic systemwide sales growth in fiscal year 2015. This growth was fueled by both an increase in unit count and higher estimated sales per unit, showcasing the brand’s expanding footprint and increasing customer appeal.
Bill Phelps attributes this sales surge to strategic menu innovation, specifically the introduction and popularity of snackable pretzel bites alongside their traditional whole pretzels. This shift aligns with evolving consumer preferences towards snacking and smaller, more versatile food options. Phelps noted the trend of customers opting for higher-value pretzel bites ($4 to $5) over the standard $3 pretzel, reflecting the broader trend of increased snacking consumption in the American market.
Wetzel’s Pretzels, primarily a franchise-based model, has also been strategically expanding its locations beyond traditional mall settings. The chain has recently opened flagship locations in prominent venues like Minnesota’s Mall of America and Manhattan’s Fulton Center. Furthermore, Wetzel’s Pretzels is diversifying its real estate portfolio by venturing into non-traditional locations such as Walmart Supercenters, transportation hubs, and street-front stores. This expansion strategy aims to broaden accessibility and cater to a wider range of customer demographics.
The financial health of Wetzel’s Pretzels franchisees is also strong, with average unit volumes reaching approximately $580,000. Phelps highlighted the improved franchisee profitability in recent years as a testament to the brand’s successful strategies and market positioning. Adding to the customer experience, Wetzel’s Pretzels has incorporated a “theater” aspect into some locations by showcasing the pretzel-making process. This front-and-center approach to dough preparation and baking emphasizes the freshness of the product and provides a visual attraction for customers, reinforcing the brand’s commitment to fresh, high-quality snacks.
Wetzel’s Pretzels was established in 1994 by Bill Phelps and co-founder Rick Wetzel. While Wetzel remains an investor in the company, his primary focus has shifted to Blaze Pizza, another growing chain where Phelps is also an investor. The acquisition by CenterOak Partners represents an exciting phase for Wetzel’s Pretzels, promising continued growth and innovation under new financial backing while maintaining the successful leadership and operational strategies that have defined the brand.
