Dive Brief:

• Whataburger hired Morgan Stanley to explore the possibility of a sale, according to the San Antonio Business Journal. The company has experienced continued growth and has been attractive to investors, according to a written statement from the company.
• Although there is no official valuation for the Texas-based chain, it could garner more than $6 billion, a source told Reuters. One of the options that it's rumored to be considering is selling a minority stake to a private equity firm or financial investor.
• Whataburger maintains 827 locations in 10 states.

Dive Insight:

While some restaurants explore sales because of a struggling business and dwindling profits, others tap outside buyers to help them achieve greater growth after they accomplish as much growth as they can organically. Texas-based Whataburger said the sale will help the company with its expansion plans while remaining true to the 69-year-old brand.

Other burger joints are making plans to boost their store counts, including Burger King, which recently announced plans to hit 40,000 global store locations by 2029. In-N-Out has also grown its footprint, expanding east into Colorado. 

Among the top 13 burger chains in the U.S., Whataburger is ranked in the middle of the pack at number 7 behind chains with larger national footprints like McDonald's, Wendy's, Burger King, Sonic, Carl’s Jr. and Jack in the Box. A larger footprint would undoubtedly boost Whataburger's sales, but part of its draw is its limited regional availability, creating a mad dash at new restaurant locations, with drive-thru lines spilling out onto the street. 

If expansion is on the menu, Whataburger may consider these enthusiasts, who could be leery of new blood in the company, which has been privately held by the Dobson family since 1951. Despite its limited footprint, Whataburger has quite the fan following, which was instrumental in its impressive sales. In a 2017 report analyzing the performance of seven QSR burger chains, Whataburger claimed 42% of the market share. The study also concluded that Whataburger customers come back more frequently to the chain than competitors. New investors could bring unwanted changes that dilute brand integrity and put a dent in customer loyalty. 

Strategic buyers have been making a dedicated effort to target brands and chains that need restructuring and 2019 is likely to be a big year for M&A activity. A number of restaurant chains including Papa Murphy's and Del Frisco's completed or are nearing a final sale, while P.F. Chang's traded private equity hands for nearly $700 million.