When looking for restaurants to buy, one of BBQ Holdings’ first questions is: Can it grow?
The owner of Famous Dave’s and other brands believes it has found a resounding yes to that query in Barrio Queen, a full-service Mexican chain with seven locations in the Phoenix area. BBQ on Monday said it would acquire Barrio for $28 million.
Founded in 2011, Barrio Queen is known for scratch-made Mexican food and tequila served in a lively atmosphere. It has opened about one restaurant a year since 2015 under owners Steve Rosenberg and Linda Nash, who will retire when the deal is done.
BBQ wants to take their baton and run with it by franchising the concept, with plans to double Barrio’s footprint over the next three to four years, said CEO Jeff Crivello.
“It’s a concept that I think will fit in any city. It would be welcomed by any community,” he said. “It’s very fun. It’s always packed, the energy is very high.”
Barrio’s restaurants have been quite profitable, with restaurant-level operating margins of 19% and cash-on-cash returns averaging 63% of the buildout cost, according to BBQ. Average unit volumes are $5 million, and liquor accounts for more than 27% of its sales.
Those metrics make Barrio Queen unique in the company’s portfolio and give BBQ the growth vehicle it’s been looking for. After Barrio opens its eighth location in the Phoenix area this year, its new owner will look to bring it to fast-growing Southern markets including Florida and Nashville, Crivello said.
Franchising adds yet another growth strategy to BBQ’s arsenal. It’s also looking to expand through ghost kitchens, co-branding, new prototypes and consumer packaged goods across its 10 brands, most of which it has added through acquisitions over the past two years. All told, it will grow by 20 locations companywide in 2022, to 336.
BBQ Holdings portfolio, 2021
Source: SEC filings
Simultaneous with the Barrio deal, which is expected to close next month, BBQ announced it had bought three bar-focused restaurants from Fun Eats and Drinks, the owner of Champps and other bar brands, for $4.5 million.
That deal adds two Craft Republic units, in Houston and Tucson, Ariz., and one Fox & Hound outside Memphis to BBQ’s fold.
Like Barrio, the bar-centric concepts represent new territory for BBQ, Crivello said.
Alcohol makes up more than half of sales at the restaurants, which will bring BBQ into the bar category—a hedge against the rising food costs and supply chain difficulties that have been dogging traditional restaurants.
“To have that bar component—and Barrio Queen also kind of fits into that with 27% alcohol—really starts to tip into that restaurant/bar category,” Crivello said.
The three bar and grills generated $8.5 million in revenue last year on AUVs of $2.8 million, BBQ said. The company owns the intellectual property for Craft Republic and could look to open more corporate locations.
The new additions prompted a new name for Minnetonka, Minn.-based BBQ. It will become Famous Hospitality Inc. later this year to reflect its diverse group of concepts.
“We’re in the hospitality business and not just barbecue,” Crivello said. “As we like to say it, ‘Yes is the answer. What’s the question?’”