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New Owners, New Start for Back Yard Burgers


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Back Yard Burgers attracted Axum Capital as a majority investor, buying out Pharos Capital.

It took a whole lot of explaining, but Back Yard Burgers has attracted a new majority investor, Axum Capital Partners, the Charlotte, North Carolina-based private equity firm.

“It was hard,” to find an investor to buy out Pharos Capital Group, says CEO Dave McDougall, who had to explain over and over why the brand has 23 company-owned stores and 32 franchised units today, down from a peak of 180 stores in 2007. “A lot of the questions were the same: what had happened to the brand? I almost joked, ‘Listen, I can tell you everything’s that wrong. I can save you a lot of time’… but I’m really looking for someone who sees what the potential is, and can look past some of the ills of the past and say you know what, there’s something here.”

Axum Capital believes there’s plenty there, and took a majority stake for an undisclosed amount. “David and his team have made great strides and we are pleased to support their next phase of growth,” said Edna Morris, Axum managing director, in a statement. Axum purchased Wild Wing Café in 2012, and McDougall expects its experience with that business will help Back Yard Burgers.

He said priorities will be, first, a remodeling program for Back Yard, which he describes as a “much more bright, airy look and feel.” Second is corporate and franchised unit growth. “I’m a big believer of putting your money where your mouth is,” he said about opening corporate stores. A new franchisee opened a store on July 10, McDougall said, adding “that hasn’t happened for a long time.”

Third is updating technology, especially “guest-engaging” technology such as mobile ordering, digital ordering and delivery. “It’s evident that those companies in the foodservice space that have really stepped out, whether that be Domino’s, the Paneras, the Starbucks, clearly the technology” plays a key role.

McDougall joined Back Yard Burgers, which is 30 years old, in 2013 as part of a turnaround effort. The company had filed for Chapter 11 bankruptcy protection in 2012, and emerged shortly after McDougall came on and Pharos put in capital. “When I got here, I was told 70 percent of the companies that declare bankruptcy usually fail within five years. I thought hmmm, that’s not good,” he recalls. “I was also told if we don’t see meaningful progress in six months, we have to do something.”

He laughs when asked why he took the job amidst all that. “Always open for a new challenge,” he says. “That was the fun of it, and you knew you had a short runway.”

Today, the future looks brighter. “This is a start of a new chapter. You have new owners and new bosses and a new start,” he said.

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Tom KaiserTom Kaiser is associate editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
 
Beth EwenBeth Ewen is editor-in-chief of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is staff writer at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonLaura Michaels is managing editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
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Nancy WeingartnerNancy Weingartner is editor-at-large of Franchise Times magazine and the editor of the Food On Demand media project. You can reach her at 612-767-3200 or at nancyw@franchisetimes.com.
Follow her on Twitter at http://twitter.com/nanweingartner.
 

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