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Muscle Maker Jumps On Reg A+ Bandwagon


Muscle Maker is testing interest in an initial public offering with a pop-up ad on its website, something that Reg A+ allows but standard IPOs do not.

T-shirts and pop-up ads are among the tools Muscle Maker Grill is using to promote its upcoming initial public offering via a new option known as Reg A+, said Bob Morgan, CEO of the Houston-based franchised restaurant chain seeking just under $20 million.

Regulation A+, passed as part of the JOBS Act in 2016, allows any qualified investor to buy shares in an IPO, in the past something that was effectively reserved for institutions and high-rolling insiders.

Also in the past is the prescribed “quiet period” that company executives were required to observe—Reg A+ allows direct communication with prospective investors via email, social media, billboards and more, things that a standard IPO prohibits.

“When this came to our attention, it seemed like, man, this is going to be perfect for us,” Morgan says, adding Muscle Maker’s majority investor since 2015, private equity firm ARHI in California, brought the option to his attention and also provided $5 million in investment to get the firm ready to go public.

They’ve made T-shirts that say “owner” on the back and show a picture of a Muscle Maker share on the front, and hung posters in the stores that tell customers they’re going public. “So the transparency is fantastic,” Morgan says, adding they’re also giving stock grants to employees.

“We want all of our employees to be an owner,” he says. “To me, that’s the future of being a public company…When you have 10,000 public shareholders pulling your way,” he thinks it’s more powerful than “having an institutional investor in New York City” —although he’s certainly not opposed to the latter, either, he hastens to say.

Muscle Maker’s offering is still in the “testing waters” phase, in which they’ve filed documents with the Securities & Exchange Commission and await questions and comments, and also are letting people know about the offering but saying nothing is for sale just now.

If everything goes smoothly, Morgan hopes for approval for an offering by Thanksgiving with shares listed on the New York Stock Exchange. Muscle Maker will use proceeds in part to expand its corporate-owned locations on military bases, an area where he sees great promise for the brand. He also touted a 12.44 percent increase from the prior year in same-store sales for corporate-owned stores for the quarter ended in September.

TriPoint Global Equities, working with its online division BANQ, will act as the lead managing selling agent for the offering. BANQ is the brainchild of Mark Elenowitz, CEO of TriPoint, who began studying Reg A and A+ arising out of the JOBS Act in April 2016, and fashioned BANQ, the electronic investment-banking platform, in part to enable alternative investments like Reg A+.

Reg A “is bringing back the small-cap IPO,” Elenowitz told Franchise Times staff writer Nicholas Upton. “It’s nothing other than a standard underwriting process. If you’re doing a $50 million deal or less, there’s no reason to do a standard deal again.”

FAT Brands, the parent of Fatburger, is the first franchised brand to try for a “mini-IPO” under Reg A+, also as a client of BANQ. Andy Wiederhorn, CEO of FAT Brands, told Upton he started down the road to do a traditional IPO but then changed to a Reg A, for a $20 million equity deal with $30 million in debt. “That would allow us to go Reg A and open the offering to all our fans of the brand around the world. This way we really get to rewards our customers and our fans by letting them participate in this creative way.”

Of course, not everyone is a fan of small-cap IPOs, in which investors could just as easily lose their shirts as hit it big, and because they are smaller, retail investors such a bad bet could torpedo their financial health.

“It’s like everything else, of course there is risk,” says Muscle Maker’s Morgan, but he encourages investors to do their due diligence. “I’d say, look at something that’s on the rise. Then look at the numbers, a 12.44 percent increase” in sales in the third quarter, among other positives at his restaurant chain, which has more than 50 franchised and corporate restaurants in 12 states.


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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 senior editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
Laura MichaelsLaura Michaels is 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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