Smokey Mo’s New Owner Switchback Capital Plots Growth Push
It took more than two years but young private equity firm Switchback Capital completed in January its first acquisition, Smokey Mo’s TX BBQ. It took time to buy six different entities and roll them into one restaurant operation poised for growth.
“Switchback was formed to formalize our interest in private equity, and specifically investing in companies originating in Texas,” said Todd Caven, who started the Austin-based firm in 2017 with Tim Keyes. “Tim I’ve known for 30 years,” working on various deals together. “We just can’t shake each other I guess.”
Smokey Mo’s is a 20-year-old barbecue chain founded by Morris “Mo” Melchor and his wife, Lisa, whom Switchback bought out in 2019 because they wanted to retire. Last October Switchback hired Craig Haley as president and Gini Quiroz as VP of human resources, whose experience includes Rudy’s Country Store & Bar-B-Q and Mighty Fine Burgers Fries & Shakes.
“We feel really good about our management team. They take a lot of pressure off us,” Caven said, because of their restaurant operations experience.
“The great news is this company is cash flow positive, and in the pandemic, we were very fortunate that our product” travels well. “In 2021, we have the highest revenues in the history” of the brand, he said, but declined to provide the number.
A refresh of the brand, a new store prototype and investments in technology are all underway, and next will come the addition of corporate stores and a planned re-launch of the franchising program. Smokey Mo’s has 16 stores now, five of them franchised.
“We look for cash-flow-positive companies with a clear path for growth and expansion,” Caven said, and also companies based in Texas. Why cash-flow-positive? “Our investors like that. Most of our money starts through family offices, and family office at least in our experience tend to like cash flow stories that also have a growth component.”
And why Texas? “We understand Texas really well. We’ve been here and lived here for many years,” he said.