Noon Mediterranean finds a buyer in Daphne's parent company

Dive Brief:

After closing seven stores and filing for bankruptcy in August, Noon Mediterranean has found a buyer, reported Restaurant Business. California-based Elite Restaurant Group shelled out $731,000 plus $100,000 in bankruptcy costs for the 12 remaining Noon restaurants, known for build-your-own gyros.
Elite will transition Noon locations to the Daphne’s restaurant brand, a 23-unit fast-casual Greek concept it took over earlier this year. The converted restaurants will feature menu items from both Noon and Daphne's. Elite, which also acquired Slater’s 50/50 burger chain in 2016 and Patxi’s Pizza in September, expects the deal to close within the next three months.
A rising star of the competitive Mediterranean fast-casual scene as recently as February, Noon had attracted $20 million from private investors in 2017. Sales grew almost 30% in 2016 but have since dropped 8.8% year over year, according to Restaurant Business. The small chain started in 2011 as VertsKebap, a döner shop in Austin, Texas, but rebranded to Verts in 2015 and then to Noon Mediterranean last year.

Dive Insight:

For a short couple of years, Noon Mediterranean was a hit in the now-booming fast-casual Mediterranean space — in 2016, the company was hoping to boast 250 stores by 2020. Despite rebranding assistance from the same company that developed Sweetgreen and private investments worth $20 million, Noon struggled. It's unclear what exactly brought down the restaurant, which saw its co-founder and CEO depart in the midst of its bankruptcy, but it seems steep lease prices may be partially to blame. Burgeoning competition didn't help either — in August, for example, popular Mediterranean chain Cava gobbled up another big Mediterranean player, Zoe’s Kitchen, with funding from Panera founder Ron Shaich.

Mediterranean concepts have enjoyed 11% growth on restaurant menus in the last five years in recent years due to consumer demand for healthier quick-service options. From hummus to tabbouleh and fresh pita to flavorful salads, the cuisine has caught the watchful eye of Whole Foods, which named it a top-five trend for 2018, and dietitians who consistently rank the fiber, fish and fats within the category as a winning lifestyle choice. This consumer interest is reflected by the rise of Mediterranean and Middle Eastern chains Cava, Roti, Hummus and Pita Co. and Taïm.

Elite, for its part, has made plenty of moves in the past few years, starting in 2016 with its acquisition of Slater’s bacon-and-beef burgers. That chain was only in California at the time and has since expanded to four states — a move that could foreshadow Noon's future under the restaurant group. Elite bought Daphne’s in April and then teased “two more acquisitions” after announcing its deal with deep-dish chain Patxi’s Pizza in September. Franchising could be a part of Patxi’s future, making that model a possibility for the new Daphne’s/Noon hybrid as well. Though Noon loses its brand in this deal, the new Daphne’s hybrid will incorporate Noon’s popular assembly-line model for gyros with Daphne’s signature Greek plates.

Though Mediterranean flavors aren’t new, as American chefs have been using spices like za’atar and harissa for years now, they are still innovative in fast-casual. But whether all of these concepts can survive in a climate of consolidation — in a field where larger operators see a profitable future — depends on how well this “lifestyle choice” sticks with consumers.