Krystal hopes that selling some restaurants will help it reach 500 locations.
The Atlanta-based burger chain on Monday announced a “strategic refranchising program.” It will sell corporate restaurants in certain markets to multi-unit franchisees with a proven track record.
Those operators will then, at least in theory, work to build more Krystal restaurants in those specific markets.
The goal for the burger chain is to grow its footprint, to 500 restaurants from its current 300 within “the next three to four years.”
That’s a tall order. Krystal finished 2022 with 287 locations, down 21% over the past five years. The chain has been in a gradual decline for much of the past decade. The company owns and operates two-thirds of its restaurants. It finished 2022 with $353 million in U.S. system sales and average unit volumes of $1.2 million.
The brand filed for bankruptcy in 2020 and was sold to Fortress Investment Group, a private equity firm that bought Krystal’s debt on the secondary market and used it to take control of the chain. Fortress acquired Krystal with a credit bid out of bankruptcy.
Fortress used a similar maneuver to acquire Logan’s Roadhouse, Old Chicago and other chains, forming SPB Hospitality. Fortress later brought Krystal into the SPB fold.
SPB wants to use this strategic refranchising for all its concepts as part of its overall growth strategy. The company is hardly the first to use such a strategy to spur growth—Jack in the Box, for instance, is taking the same route to generate growth in its business.
That company is targeting new and existing franchisees. But the strategy can be slow, given that multi-unit operators are the hottest commodity in the restaurant industry at the moment. In addition, high interest rates could slow development of new units, as can competition for real estate.
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