What a Bojangles sale could mean for the restaurant's future

Axios

2 days ago

A rumored $1.5 billion Bojangles sale could signal a new direction for the fried chicken-and-biscuits restaurant long seen as an exclusive staple of the South.
Why it matters: Bojangles is the place North Carolinians tell visitors they "have to try" while in the state. It's often the first stop for natives returning home, hungry and craving a taste of nostalgia.
In recent years, the brand has increasingly been meeting fans where they are, by opening more than 200 restaurants in other regions across the country, from Las Vegas to Dallas to Columbus, Ohio.
A sale as big as it's rumored to be would require Bojangles to rev up that growth, industry experts say.
Driving the news: The Wall Street Journal, citing "people familiar with the matter," first reported that the Charlotte-based company was working with investment bankers on a potential $1.5 billion sale. That's triple the $590 million private-equity firms Durational Capital Management and TJC paid for Bojangles in 2019, when they took the company private.
Reality check: Industry experts say the number may just be Bojangles shooting high.
"Bojangles "resonates strongly with its core audience," Billy Roberts, senior analyst with CoBank, says. "For it to support that valuation, it would have to continue a similar performance as it expanded nationally — even more nationally than it already is."
While Bojangles is popular in the South, it doesn't have the same national following as, say, a Whataburger.
John Gordon, principal at Pacific Management Consulting Group, says the $1.5 billion figure is inflated. "These numbers are strictly marketing numbers that the book runner — which is the firm that's trying to get other investors interested in this — they come up with."
Bojangles has declined to comment on the potential sale, saying it does not address rumors or speculation.
The Wall Street Journal also noted that Bojangles may ultimately decide not to sell.
By the numbers: Bojangles, founded in 1977, now has more than 830 restaurants in 20 states, up from over 600 stores in 12 states in 2019.
The chain has expanded to Texas and metros like Phoenix.
Opening a Bojangles costs between $2.6 million to $3.4 million, according to a 2023 franchise disclosure document. Gordon says that's a very high cost per store.
What they're saying: "Many North and South Carolinians have moved to other states, and when we come, they celebrate that Bojangles has made it to the new town," Bojangles CEO Jose Armario told Axios during a recent interview at the company's new south Charlotte headquarters.
Armario, who took the helm in 2019, says Bojangles has seen "tremendous success" in all its new markets.
"Last year, we outpaced our competition by 400 basis points," he adds.
Yes, but: Bojangles has expanded in the past with mixed results. For example, in 2016, a franchisee closed eight restaurants in Orlando after just a year.
The big picture: With the state of the chicken industry and the restaurant M&A world, it tracks that Bojangles would want to at least consider a sale now.
"The headline almost writes itself: Brands are striking while the iron — and the chicken — is hot," Roberts says.
U.S. chicken sales have been growing for two decades, outpacing beef due to its cheaper costs and versatility.
"Our founders were smart enough to know chicken was always going to be in demand," Armario says.
Zoom out: Dave's Hot Chicken shook the restaurant world recently when Roark Capital agreed to buy the fast-casual chain for around $1 billion. The restaurant, which started as a California parking lot pop-up and has expanded to Charlotte, is considered a leader in the nationwide hot chicken craze.
The average Dave's location does $3.1 million in sales annually, according to Nation's Restaurant News, citing Technomic. Bojangles tend to do over $2 million.
Other restaurants are hopping on the chicken trend. Taco Bell, for one, recently added nuggets to its menu.
What's next: As the market becomes saturated, analysts suggest Bojangles may need to follow the lead of Wingstop and Raising Cane's by innovating its menu.
Bojangles regularly introduces new products, like chicken and waffles, as well as its limited-time Bo-Rito breakfast wrap.
"If they don't come up with sauces and rubs and all that kind of thing in order to make it distinctive, then they're going to have a very slow way to go," Gordon says.