Smashburger To Use $35 Million In Capital Funding To Fuel Growth

Smashburger announced Tuesday that it has secured $35 million in capital funding "" the first outside capital infusion for the six-year-old Denver restaurant chain and a pot of money that will allow it to increase its pace of expansion.

The chain, which currently has about 210 locations in 29 states and four countries, will be able to grow more quickly in new markets like San Francisco and Washington, D.C., and get more quickly into as-of-yet-untapped markets such as Toronto and the United Kingdom, said David Prokupek, chairman and CEO of parent company Smashburger Master LLC.

The round of funding comes from Golub Capital, a New York-based equity firm specializing in consumer, restaurant and retail businesses.

"It's important for us. We started being all equity-funded, and we put a good $50 million in to get to where we are now," Prokupek said in an interview. "This is letting us grow in some of the bigger cities in the United States and to get there quicker." Smashburger's growth already has been record-setting. Launched in 2007 with investment from Consumer Capital Partners "" the Denver firm that also started Quiznos "" it opened its 200th store in February, reaching that milestone faster than any other fast-casual restaurant chain.

The chain is part of a new wave of "better-burger" restaurants selling higher-quality, more expensive items than traditional fast-food burger chains.

It is generally viewed as the No. 2 chain in that category, sitting behind only Lorton, Va.-based Five Guys, which operates more than 1,000 locations.

In January, Prokupek said the company planned to open 20 to 30 corporate-owned stores a year, focusing corporate-owned growth on the largest cities while entrusting franchisees to open another 30 to 40 stories a year in smaller markets.

With the capital infusion, it will ramp up plans and open 30 to 35 new corporate-owned stores in 2014, meaning the chain as a whole could debut 60 to 80 new locations next year, he said.

In addition to continuing to expand in the Denver area, much of the initial focus will be on growing stores in the recently opened markets of San Francisco, Washington and Los Angeles, Prokupek said.

But it hopes to enter Toronto next year and has begun discussions about getting into England, and this infusion may allow it to speed up plans to get into Australia further down the line, he said.

"This is going to help us grow," Prokupek said. "It's our next phase." Golub, which has more than $8 billion in capital under management, has been tracking Smashburger's growth for several years, Prokupek said.

"We have known the Smashburger team for several years and believe the company is well positioned to become the industry leader in the better burger category and in the fast casual section overall," said Charles Riceman, Golub Capital managing director.

"We were impressed with Smashburger's industry-leading franchisees, as well as the company's execution on its business goals to date and we look forward to being a part of the company's success going forward."

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