UPDATED: Swig Sells 250 New Stores to 12 New Franchise Partners

UPDATED: Swig Sells 250 New Stores to 12 New Franchise Partners

Swig expects to sell an additional 250 franchise locations before the end of 2023. Based upon industry estimates, plus Swig's own franchising disclosures, we feel this puts the brand on track to produce projected  annual systemwide gross sales of over $225 million once the new units come online.

By our calculations, such results would give Swig a corporate valuation of at least $2.0 5 billion, in other words, making the "Dirty Soda" pioneer a 2X-Unicorn.

AUTHOR'S NOTE: Earlier today (31 August 2023) Utah Money Watch published a new writeup/analysis titled "Mea Culpa: Updating my Story About Swig's Move Into Franchising and Its Coming Transition to Multi-Unicorn Status."

Over the past week the feedback of several individuals led me to re-evaluate some of the underlying financial assumptions found within this story, assumptions that I found to be incorrect.

For that I apologize: to Swig, its founders/executives, Swig's new franchise partners, The Larry H. Miller Company, Savory Management, and to you, the subscribers, followers, and fans of Utah Money Watch.

Nevertheless, there was much in this, my original story, that was correct, especially the news aspects of the story itself, plus the incredible journey of Team Swig during its 13-year journey to today.

So ... I have published the new and updated writeup today noted above. I invite you to read it.

Regardless, I have now modified/updated the text below where appropriate.


David Politis,
Founder, Editor, & Publisher
Utah Money Watch

P.S. Constraints of Ghost, the publishing platform we currently use, do not allow us to use Strikethrough Text within Headlines. Hence, we deleted certain portions of the original Headline that are not accurate; however, we did not modify the original URL which contiains the word structure of the original headline.  DLP

Lehi, Utah-based Swig just announced that it has sold 12 partners the rights to launch a combined 250 franchise locations. for an estimated price of at least $134 million.

This estimated total is based upon Swig's own disclosed costs. to acquire a single franchise location at a starting price of $534,900+, an amount separate from the $39,500 franchise fee. And when you run the math, that produces an estimated revenue amount of at least $134 million.

Additionally, the Swig announcement also explained the company's intent to sell the rights to an additional 250 franchise units before the end of 2023, which (when built) would bring the company's total number of locations to 570 stores (70 corporate-owned today and 500 franchise locations).

Based upon data supplied by Dr. Franchises, a "leading digital marketing agency for franchisors and franchisees," it estimates that each Swig location generates over $400,000 annually. {AUTHOR'S NOTE: This estimate is at least 3X lower than it should be.}

If accurate, this would mean that Swig would generate over $225 million in annual system-wide gross sales once each of the 500 franchise stores are built and operational (including the separate revenue we estimate the 70 additional corporate stores would also generate).

A Brief Swig History

As I wrote in February 2021 for Deseret Business Watch, Nicole and Todd Tanner "decided to take the plunge into what they described as the 'Dirty Drink' market (aka, specialty sodas) by opening their own store called Swig (in St. George, Utah)." That was in 2010.

Roughly seven years later, Swig was acquired in an undisclosed, all-cash deal by Four Foods Group in December 2017, the then nine-year-old, Utah-based Top 100 Restaurant Management Company which was founded and led by the husband and wife team of Andrew and Shauna Smith.

Self-portrait photo of the author during his first Swig "taste test" in February 2021.

However, by the end of 2019, Four Foods Group had sold all of its Kneader's and Little Caesar's franchise units, positioning the Smiths and their team for new opportunities.

As it turned out, the most attractive opportunity for the former Four Foods Group execs was the creation of Savory Management, a value-add management company that collaborated with Utah-based Mercato Partners, one of the oldest and largest venture capital firms in the Rocky Mountain region.

In turn, that collaboration led to Andrew Smith joining Mercato as a Managing Partner of its newly formed investment fund, the Savory Restaurant Fund, a growth investment vehicle focused on emerging Quick Serve Restaurant concepts.

At the time of the Mercato/Savory Management collaboration, Savory folded three QSR chains into the Mercato/Savory family:

Since the Savory/Mercato tie-up, a total of $200 million has been raised in two separate funds, and Savory has now made investment bets on seven additional  brands, including

for a total of nine QSR chains and one QSR service company (86 Repairs).

The Sale of Swig and its Future

Since Savory purchased Swig in 2017, Savory was on track to grow the "Dirty Drink" and treats chain to over 46 locations by the end of 2022, more than double the number of units at the time of the acquisition.

But the Swig profile changed dramatically last November when the Larry H. Miller Company announced it had purchased a majority ownership stake in Swig from Savory for an undisclosed amount.

At the time, Gail Miller, Owner of the LHM Company, said,

"I am proud to invest in Swig, a business founded by a woman whose approach to community building aligns with ours. Nicole and the team are invested in their leaders and employees, and their values are strongly reflected in their everyday operations."

With yesterday's announcement concerning the sale of the 250 franchise locations, Swig will expand into seven new markets:

  1. Arkansas,
  2. Idaho,
  3. Florida,
  4. Missouri,
  5. North Carolina,
  6. South Carolina, and
  7. Tennessee.

Once all 500 franchise locations are built, Swig should generate over $225 million in annual gross revenue per year based upon

  • An estimated $200 million in annual franshise fees, plus
  • An additional $28 million in gross sales from its 70 corporate-owned stores.

{NOTE:  This is based upon the Dr. Franchises estimate that each Swig location produces over $400,000 in annual sales.}

Getting Swig to 2X-Unicorn Status

Presuming Swig's franchise partners are able to get these 500 new units locations up and running by the end of 2024, what does that do to the value of the company.

Based upon

⚫️  A presumed annual income level of $400,000/store, and

⚫️  The published annual fee schedule for franchisees Swig has published, and

⚫️  A median 12.5X valuation multiple* for restaurant chain EBITDA (Earnings Before Income Taxes, Depreciation, and Amortization) in 2023,

that would mean Swig would have a corporate value of at least $2.0 5 billion.

{AUTHOR'S NOTE: The contraints of Ghost, the publishing platform we currently use, do not allow us to use Strikethrough Text within a standard bulleted list. Hence, the funky adaptation shown immediately above.}

And that's without assigning any EBITDA valuation to Swig's corporate-owned stores.  {AUTHOR'S NOTE: Today's new writeup does take into account the EBITDA of Swig's corporate-owned stores.}

In other words, Swig is on track to become a 2X unicorn in under two years.

By our estimation, we believe Swig is slated to be worth $2.0 5 billion — likely within two years.

Not bad for a Dirty Soda chain started in St. George 13 years ago.

* — FINAL AUTHOR'S NOTE #1:  The median 12.5X valuation multiple for restaurant chain EBITDA was provided by microcap.co here. Conversely, Kroll's 2023 Industry Insights Report for the Restaurant M&A Industry suggested EBITDA valuation multiples for restaurant chains (like Swig) might range from 15.2X to 19.6X. , which would push Swig's valuation significantly higher, perhaps as high as nearly $3.9 billion. As such, we opted to go with the lower multiple provided by microcap.co.

FINAL AUTHOR'S NOTE #2:  So there is no internal finger-pointing at Swig, The Larry H. Miller Company, or Savory about this writeup and analysis, no one at any of these firms released any data or financial calculations to me, or even pointed me "in the right direction" for underlying revenue or valuation multiple assumptions.