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Michael McLellan

Krystal hamburger chain sold to investment firm

by Michael McLellan | Dun & Bradstreet Editor

March 23, 2012 | 2 Comments »

Chattanooga, Tennessee—based hamburger chain The Krystal Company has been sold to private investment firm Argonne Capital Group for an undisclosed amount. Krystal owns or franchises a total of 360 restaurants in about a dozen southern states. More than 230 Krystal locations are company-owned, while the rest are franchised. In addition to operating its restaurants, Krystal sells frozen burgers through grocery stores.

While it has yet to make significant investment in expansion outside the Southeast, the company has been slowly adding corporate-run locations to its portfolio. The 80-year-old hamburger chain added 10 new company-owned restaurants in 2011 and despite the sale, the company expects to continue to expand gradually during 2012.

Krystal’s headquarters will stay in Chattanooga. The company’s new board of directors will include Michael Klump and Karl Jaeger from Argonne Capital Group and former Church’s Chicken president and CEO Harsha Agadi.

Argonne Capital Group, which already has investments in hundreds of IHOPs and Applebee’s locations, sees an opportunity to capitalize on Krystal’s recent run of success. Krystal ended 2011 with increased sales, an increase in per-transaction sales, and consistently outperforming competitors in driving traffic last year. Krystal has enjoyed continued sales growth so far in 2012.

Like its doppelgänger White Castle in the Midwest, Krystal is a regional fast-food icon known for petite, square hamburgers (what many folks might call a slider). Krystal’s long history and strong association with the Southeast has made it a regional favorite. But unlike White Castle, Krystal’s menu has evolved to offer customers a variety of unique items.

Krystal’s menu also features a larger-sized hamburger, chicken wings and sandwiches, and chili dogs. All of the items on Krystal’s menu are distinctive in size and shape. Cheese Krystals, Krystal Sunrisers (small breakfast sandwiches), Krystal Chiks (small chicken sandwiches) and Pups (small hot dogs offered with chili and cheese) are just a few of the chain’s popular menu items.

The company continues to expand its menu variety with breakthrough offerings, including Krystal’s Breakfast Scramblers line that takes traditional plate breakfasts and stacks them smartly in bowls to be conveniently enjoyed scrambled up or layer by layer. Other popular menu expansions are Krystal MilkQuakes, real ice cream milkshakes made with premium, all-natural ingredients, and Krystal Freezes, the company’s frozen slush drink made from pure cane sugar and fruit flavorings. Krystal has also added an energy drink called Krystal Blitz.

On the technological front, the company has served up convenience to its customers by offering free Wi-Fi Internet access at most of its locations. The chain launched its first “Krystal HotSpot” back in 2003. Krystal has also focused on using social media sites such as Facebook and Twitter to maintain customer loyalty through various product promotions and contests. The company has relied strongly on that brand loyalty to help it compete with national chains such as McDonald’s and Burger King.

Piper Jaffray advised Krystal through the sale. Atlanta-based law firm King & Spalding served as the company’s legal counsel during the transaction.


Photo by Rich Caszeta used under Creative Commons License.

We had two Krystals in the Charlotte NC area, Unfortunately, they were poorly managed and failed. I would love to see them return and try again with better management.

I live in Knoxville TN. When my children come to visit the first thing they use to ask was let’s go to Krystal. Not any more – they say its not like it used to be! I stop at a Krystal on Lovell road every Thursday for a couple of sunrisers on my way to volunteer at a local hospital and now I know why my children feel the way they do.

As a retired CEO I could recommend several low cost innovations that would instantly increase sales and bring back the Krystal of old. My consulting fee and ideas would be nominal because I would like to see Krystal of old!

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