Eagle Merchant Partners

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Eagle Merchant Partners Steps Into Code Ninjas

Eagle Merchant Partners is taking a stairstep approach to investing in Code Ninjas, its entry into the kids’ education space. Poised to take a majority stake earlier this year, the private equity firm switched to a minority investment.

“When COVID hit, we said a full majority investment would be tough for everyone to agree on valuation,” said Stockton Croft, the former IHOP franchisee who is a partner at Eagle Merchant. The ultimate deal: “We’d buy a minority piece, we’d take a board seat, but if things go well we’d have a call option to make a majority investment” in the next 18 months or so.

One attraction to the deal, Croft said, was founder David Graham’s willingness to both seek assistance and also bring in a new CEO to take the 240-unit franchise to a new level.

“He really knew he needed help in areas we could help,” including site selection and franchisee selection, Croft said.

He likened the situation to Eagle’s investment in Chicken Salad Chick, in 2015, when founders Stacy Brown and the late Kevin Brown wanted a new CEO, and Scott Deviney was brought in.

“For us to have a good working relationship with that CEO, it’s very positive, because we’ve seen founders that can say they want a new CEO but then they don’t really support them, and that’s a tough situation,” Croft said. The CEO is selected but not yet announced.

Eagle Merchant Partners had two successful exits recently, selling Chicken Salad Chick to Brentwood Associates last year after achieving a seven-fold increase in systemwide sales since 2015.

The firm also sold United PF Partners, the largest franchisee in the Planet Fitness system, to American Securities in January. Eagle Merchant Partners and JLM Financial Partners established United PF in November 2016.

Under the leadership of CEO Trey Owen, United PF was then a collection of 59 Planet Fitness franchisee locations in nine states. Today, United PF has 160 locations in 14 states.

See more about this deal in the next Franchise Times Dealmakers e-newsletter, publishing July 13.

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