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Business Focus - Zaxby's expansion plans
Founded in Boro, chain sells stake to Goldman Sachs
In this photo from March 2015, Zaxby's co-founders Zach McLeroy, holding microphone, and Tony Townley speak at the grand opening of the restaurant on the Georgia Southern University campus. - photo by By SCOTT BRYANT/staff

On March 27, 1990, Zach McLeroy and Tony Townley opened their first Zaxby's restaurant in Statesboro, almost exactly where the Zaxby's on the Georgia Southern campus now sits.

Last week, McLeroy and Townley announced that Goldman Sachs Merchant Banking Division will acquire a significant stake in the company, according to a press release from Zaxby’s. The release said the “partnership will support accelerated growth for Zaxby's as well as expansion into new sales channels with a guest-focused strategy.”

The deal is expected to be finalized before the end of the year.

Zaxby's, the fast-casual chain known for its chicken fingers, wings and signature sauces, operates primarily in the Southeastern United States, with more than 900 restaurants in 17 states. Georgia is the largest market today with 190 stores. North Carolina is next at 97.

"I look forward to working with the team at Goldman Sachs to continue building the brand I founded 30 years ago in Statesboro,” said McLeroy, who is the company’s CEO, too. “This partnership symbolizes the strength of our company and their involvement will accelerate our growth and expansion into a national brand."

QSR, a magazine dedicated to following the restaurant industry, reported that Townley will no longer be part of the day-to-day operation of Zaxby’s, choosing to focus more on his family. About a year ago, according to QSR, McLeroy and Townley decided to seek a private-equity partner, which drew a “tremendous amount of interest.”

The dream of expanding across the continent, however, is something Townley and McLeroy have considered for some time. When the two came to Statesboro in March 2015 for the grand opening of the Chandler Road restaurant, McLeroy said: “Of course, we want to become a nationwide brand, it is one of our goals and we will be there one day once we meet the challenges … We look forward to being a national brand."

The Goldman Sachs Merchant Banking Division, which will help manage the chain’s expansion, is the primary center for Goldman Sachs’ long-term principal investing activity. 

"Zaxby's is a fantastic company with a founder-led culture, loyal customers, and talented employees,” said Nicole Agnew, managing director in the Goldman Sachs Merchant Banking Division. “We are excited to partner with the management team to provide long-term capital for their next phase of expansion. We are confident we can grow the brand while remaining authentic to what people love about the restaurants."

According to QSR, at the end of 2019, Zaxby’s ranked fourth among quick-service chicken chains in terms of total domestic systemwide sales. Chick-fil-A ($11 billion) was first, followed by KFC ($4.8 billion), Popeyes ($3.75 billion), Zaxby’s ($1.84 billion), Raising Cane’s ($1.466 billion), Wingstop ($1.4 billion), Bojangles ($1.29 billion), El Pollo Loco ($894 million) and Church’s ($700 million).

In total, Zaxby’s, which is based in Athens, expanded by 86 restaurants since 2016. 

In an interview with QSR, McLeroy said he expects to continue along that growth path, just to pick up momentum. He said there’s “huge opportunity” in Texas. And even north into Virginia. “Grow more in Illinois. We’re on the border of going back into Ohio. We were in Ohio once before. … We were even thinking about possibly growing in the Washington, D.C. area.”

Even though Townley is choosing to take a step back, he said he welcomes the new partnership.

"I am excited to have a firm like Goldman Sachs joining the Zaxby's family,” Townley said. “This new partnership is a testament to what our employees and franchisees have helped us create thus far. Goldman Sachs' knowledge and resources will help continue to build upon the strong foundation we have laid out."

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