Dive Brief:
- Lemonade Restaurant Group and Modern Market Eatery announced yesterday that they are merging to form Modern Restaurant Concepts. Financial terms of the deal were not disclosed, and the two restaurants will operate as separate entities, according to a press release.
- Both restaurants are owned by Los Angeles-based private equity firm Butterfly. Global investment firm KKR will give Lemonade — a cafeteria-style fast casual restaurant specializing in California cuisine — funding as part of the deal. The firm will become a shareholder in Modern Restaurant Concepts alongside Butterfly.
- Co-CEOs and co-founders of Modern Market Eatery Rob McColgan and Anthony Pigliacampo will head the newly formed restaurant group. Former Lemonade CEO Larry Kurzweil will serve as operating partner of Butterfly and as an advisor to Modern Market Eatery as part of the deal. CKE Restaurant Holdings vet Jim Sullivan will become the new group's chief development officer, and will spearhead franchising and licensing efforts for both restaurant brands.
Dive Insight:
Though together these brands boast only 58 restaurants across 10 markets, their merger signals growing opportunity in the better-for-you fast casual space. Co-founder and co-CEO of Modern Market Eatery told Nation's Restaurant News that the deal will allow the chains to share vendors like online ordering services at a cheaper cost as they ramp up their national footprints — something their new platform should help accelerate.
Lemonade will reportedly maintain its expansion focus on California, but Modern Market plans to boost its presence in existing markets of Colorado, Texas, Arizona, Washington, D.C. and Maryland. Both restaurants serve health-focused salads, soups, sandwiches and other plated meals that cater to various lifestyle diets. Modern Market goes so far as to include a macronutrient profile of diners' meals on their receipts to help "flex" dieters work toward weight loss or fitness goals.
Both brands also spotlight fresh ingredients and plant-based food, and for good reason. The plant-based food market is worth more than $3.7 billion according to GFI data, spurring the growth of chains like By Chloe and California-based VeganBurg, which plans to add hundreds more units in the next few years. But Lemonade and Modern Market's inclusion of traditional animal-based proteins — and customizable offerings — could also make it more marketable to mainstream consumers, especially as different specialty diets come in and out of vogue.
Chipotle has found success with this strategy. The fast casual brand's inclusion of Lifestyle Bowls, which cater to diets such as keto, paleo and Whole30 and can be ordered online, generated 1.3 billion media impressions just a few days after launch, CEO Brian Niccol told investors during its fourth-quarter earnings call. The move was a low but savvy investment, as the chain didn't add any new ingredients to its menu, but simply bundled them together to make it easier for diet-conscious diners to order.
Lemonade and Modern Market Eatery's leaders seem confident that the merger will help the concepts thrive in "non-traditional foodservice outlets across the U.S.," but the true test will come when the brands venture beyond their core markets. With the fast casual segment's attention trained on fresh and healthy offerings, it may need to market more to stand out from major (and less expensive) competitors.
