Zoe’s Kitchen finalized its $300 million acquisition by the Cava group in 2018. The deal was announced in August 2017. The major financier of the deal was Act III Holdings; an emerging brand financing group created by Ron Shaich who was initially the CEO of Panera Bread. Kevin Miles, who was Zoë’s Kitchen’s CEO, is no longer with the company. Shaich takes on the chairmanship of the merged company, while Brett Schulman holds the CEO position. According to Restaurant Business, the combined acquisition deal officially ended Zoë’s Kitchen’s tenure as a publicly-traded company.
About Zoë’s Kitchen
Zoe’s Kitchen is a restaurant chain headquartered in Texas, United States. Zoe’s Kitchen serves a variety of meals, including pasta salads, pitas, chicken salad, and grilled chicken sandwiches. The chain has grown steadily over the years to include 200 locations with plans to expand further. Zoë’s Kitchen is famous for its Mediterranean-inspired food and out-of-the-way recipes made using fresh ingredients. Zoë and Marcus Cassimus founded Zoe’s Kitchen in 1995. Originally, Cassimus owned a 51% stake in the company as the restaurants were not franchised yet. In 2007 Cassimus sold a significant stake of his ownership to Brentwood Associates of Los Angeles. Cassimus announced later that he would remain as the company’s CEO and that the menu would not be affected.
Zoe’s Kitchen Performance Before The Cava Acquisition
Zoe’s Kitchen had been rapidly expanding and focused on franchising the business. Meanwhile, their sales had been rapidly declining. According to CNBC, Zoë’s had registered a net loss of over 3.6 million. The loss was due to their rapid expansion, which resulted in high employee turnover and the hiring of less experienced managers. The acquisition was Zoë’s Kitchen’s saving grace as they became a privately traded company. This let them off from their shareholders’’ heat and scrutiny.
How Is Zoë’s Kitchen Doing Now After The Cava Acquisition?
After the 300 million acquisition, the new owners conducted a survey to find out what customers thought about the establishment. The primary response they got was the food inconsistency and serve time. Customer feedback also revealed that most people believed that Zoë’s Kitchen only served Mediterranean food, which wasn’t the case.
While the acquisition might seem like a good deal for Zoë’s Kitchen, experts argue that the company might have been undervalued. In 2016, Zoë’s had been one of the hottest shares on the stock market trading at $35 a share. The company’s investors were hopeful of the company’s growth potential. When the offer for the acquisition was made, the share price for Zoë’s Kitchen fluctuated from $12.78 to $12.88. The fluctuation meant that either the shareholders of the company expected a more significant offer or they were attempting to recoup most of their losses.
Experts, however, didn’t see any other offers happening and felt that Zoë’s acquisition by Cava would be beneficial for the company. They further added that the acquisition would pull Zoë’s out of the slump that had seen it get dragged down to 23% by the time of the purchase. In July last year, one of the chain’s restaurants was closed down and the reasons for the closure are still indefinite. The acquisition saw Zoë’s Kitchen getting scooped up at a time when other Mediterranean restaurants were struggling to boost their sales and traffic.
How Does The Future Look Like For Zoë’s Kitchen?
Having been a publicly-traded company and experienced significant losses over the four years, Cava’s acquisition has to be the best thing to have happened to Zoë’s Kitchen. Once it was a done deal, Cava went from 75 restaurants on its radar to 330.
Zoë’s Kitchen had been providing disappointing results to its investors for long, and some changes, according to Brett Schulman, were inevitable. He, however, noted that these changes would have made Zoë’s Kitchen have a hard time implementing, due to the scrutiny. With the acquisition, Zoë’s Kitchen gets to increase its sales as well as implement the necessary changes that would have been otherwise difficult before. Schulman further added that going private was impactful for Zoë’s Kitchen as they got a chance to test changes without necessarily worrying about their effect on the company’s stock price.
With Zoë’s Kitchen, Cava expanded its geographical footprint. Even thoughZoe’s Kitchen might have faced difficulties with its sales before, its merger with Cava Grills created a new future for the restaurant, as it got incorporated into the Cava dynamic. Zoë’s Kitchen is also estimated to make gains since Cava has business magnate Ron Shaich who is the founder of Panera Bread, a company known mostly for its impressive sales numbers and a reputation of using technology ahead of its competition.
Shaich modernized the pay and order process and enhanced mobile-order to speed the customers through checkout. This was years before rivals such as Taco Bell and McDonald’s even began experimenting with the technology. That kind of progressive thinking is what will make Zoë’s Kitchen back to the powerhouse it was before. Cava Grill is looking to keep expanding and has its eyes set on incorporating more food Items on their menus. The company is on the road to making Zoë’s Kitchen menu all-inclusive, including adding more vegan-friendly meals and other cuisines such as Italian and Mexican foods, for a more sophisticated look and feel.
The Deal’s Terms
Zoe’s Kitchen had a 35-day shopping window to seek out other acquisition offers. Cava offered Zoë’s Kitchen a 33% premium at $12.75 per share. After the acquisition, Zoë’s share prices shot to more than 33 percent, which indicates that shareholders were hopeful of growth.
While Zoe’s Kitchen has not made any significant growth since its acquisition, it seems to be recovering following the influence that Cava Grills holds in the fast-casual business. The company hopes to boost Zoë’s Kitchen’s sales further while still being inclusive with their menu.