The Unlikely Group Getting Rich Off Dave’s Hot Chicken’S $1 Billion Deal

In Dave’s sale to Roark Capital, four previously impoverished high school dropouts—including a former stand-up comedian and line cook, rapper Drake, and the son of an oil billionaire—win.

“How late did you guys stay out last night?” jokes Bill Phelps, CEO of Dave’s Hot Chicken. In Forbes’ Jersey City office, the 69-year-old, who joined the Los Angeles-based spicy chicken chain in 2019 after serving as the CEO of Blaze Pizza and Wetzel’s Pretzels, is seated on one side of a large conference room table next to his second-in-command, Dave’s president and COO Jim Bitticks, another Blaze alumnus.

Two of Dave’s four cofounders, Arman Oganesyan, 33, and Dave Kopushyan, 34, are on the opposite side and appear to be heading to or coming from a major night out. The brand’s namesake, Kopushyan, is a cook who sports a stylish outfit consisting of blue-washed jeans adorned with black stars and a white T-shirt. In contrast, Oganesyan is wearing shorts, a Versace silk shirt in bright pink and orange, matching pink sunglasses, and a Hermes belt. His arms and legs are bare to display elaborate tattoos.

The two have a lot to celebrate, even though neither of them claims any mischief the night before. Their visit to Forbes is the final stop on a fast-paced two-day press tour that follows the June 2 announcement that Dave’s sold 70 percent of its business to Roark Capital, the $1 billion private equity firm that owns restaurants like Subway, Dunkin’, and Buffalo Wild Wings. They will be returning to Los Angeles on a private jet from Teterboro Airport following the interview.

In 2017, Oganesyan, Kopushyan, and brothers Tommy and Gary Rubenyan founded Dave’s. The four were all high school dropouts and the children of Armenian immigrants who shared an East Hollywood upbringing. In a parking lot close to their childhood home, they launched the company as a pop-up. With six different levels of spice (the hottest, “The Reaper,” requires customers to sign a waiver), their cayenne-coated, Nashville-style chicken quickly became a cult favorite. With the help of a group of famous investors, including rapper Drake, and ongoing social media hype about the brand, which claims to generate millions of views on TikTok every week, Dave’s was able to grow into a $620 million (2024 systemwide sales) company with over 300 locations worldwide and a prime target for a takeover.

The four cofounders are now wealthier than they ever dreamed of being, having once been so impoverished that they claim they had difficulty raising the $900 required to open the first Dave’s popup. Before the sale, each owned about 10% of the company. They are now selling about 80% of their stakes, which comes to about $80 million (pre-tax). “The money is in our accounts,” Oganesyan declares, acknowledging that he looked up on Google if Roark could ask for the money back. “Wires are always there. You cannot take back money that you have unintentionally transferred to someone. Dave’s chief business officer and former standup comedian Oganesyan shared a picture of himself sitting on the hood of an electric blue McLaren the day before the Roark deal was announced. He wrote, “Patiently waiting for all my relatives in Armenia to call and ask me for money.”. “.”.

It’s a significant increase from their previous cash out. In 2018, the founders sold half of the company—Dave’s only had one location at the time—to a group of investors led by CEO Phelps and Hollywood producer John Davis, the son of multibillionaire oil and entertainment magnate Marvin Davis (d.). The sale was for $2 million. 2004) who is currently well-known for investing in food. (The two had previously collaborated on Blaze Pizza and Wetzels, which Phelps founded. The boys captured my heart. “This is a $1 billion company,” says Davis, who says he knew something about them from the start. “.”.

Phelps and Davis were the ones who made it grow so quickly and large. Although they collaborated on the other two restaurant concepts, this one is the most successful to date in terms of the company’s final valuation. Both Davis and Phelps made 250 times their original investment. At the time of the sale to Roark, Davis and Phelps held approximately equal shares in the business, making them the biggest shareholders. Davis claims he retained some of his ownership stake following the sale, but he declined to share it. Phelps, who would not disclose his ownership stake, claims to have sold half of his shares and that he and the other members of his investment group decided to donate a portion of their profits to establish a bonus pool for Dave’s executives and staff, of whom about 20 will become millionaires. “From the support staff to the assistant restaurant manager level, the average bonus was roughly $100,000,” COO Bitticks continues.

In order for Dave’s to reach its current state, many things had to go right. A significant contributing factor was the founders’ well-timed wager on chicken. According to John Gordon, a restaurant industry expert and the founder of Pacific Management Consulting Group, “coffee and chicken are the two hottest new concepts in the restaurant industry.”. In 2010, chicken surpassed beef as the most consumed meat in the United States. A. stated by the U.S. S. . Department of Agriculture. Due to their apparently endless demand for the protein, chicken restaurants like Dave’s, Wingstop, and Raising Cane’s have become some of the fastest-growing restaurant chains in America in recent years.

In 2017, Oganesyan says he approached his friend Kopushyan, whom he had met in middle school, because of this emerging trend. At first, the sale was difficult. Kopushyan, a vegetarian who worked at Elf Cafe, a vegetarian restaurant on Sunset Boulevard, was formerly a line cook at renowned chef Thomas Keller’s Bouchon restaurant in Los Angeles. Nevertheless, Oganesyan persuaded his friend after a month of lobbying, and he created a recipe that, according to him, is 98% identical to the one Dave’s currently sells. Tommy Rubenyan and his older brother Gary were enlisted by the two, and they would later assist in providing the funds needed to open the first store.

The operation was incredibly resourceful. Although they first considered operating out of a food truck, they ultimately chose to use a pop-up, borrowing tables and chairs from their relatives and spending the $900 on a fryer and heating lamps.

Five days after opening, Dave’s became an overnight sensation after receiving a fantastic review from the local food blog Eater LA. They launched their first restaurant in East Hollywood within a year. Despite being in what Phelps calls a “dump”—”we would never approve that site today,” Bitticks adds—Dave’s food became so popular that the restaurant’s founders say it made $5 million by the end of the year.

“The cult following was the cause,” Phelps says. They used Instagram to create the [Eater LA] article, which attracted a lot of people to the restaurant and resulted in two-hour lines for that establishment. At first, the company mainly relied on Instagram to promote its goods. However, it has also gained popularity on TikTok, where posting videos of oneself eating and evaluating Dave’s fries, sliders, and nuggets is popular.

The founders claim that investors showed interest right away, which is not surprising. Most of the questions were dismissed, but one in particular caught their attention: a post-it note left with the manager of the restaurant. According to Kopushyan, “it simply said ‘founders call John Davis.”.

One of Hollywood’s most successful producers, Davis has over 115 credits, including “Predator” and “Doctor Dolittle,” and his films have brought in $8 billion at the box office. He has also established a reputation for being a prosperous early backer of fast-casual, early-stage ideas over the last thirty years. In 1997, Davis invested in Wetzel’s Pretzels, a rival to Auntie Annie’s that was started by Phelps and Rick Wetzel. In 2008, Davis and his investment group sold their share of the company for $36 million. In 2012, Wetzel and his wife Elise founded another restaurant concept called Blaze Pizza, and Davis and Phelps joined forces once more as two of the original investors. In 2017, they reportedly received $250 million for the sale of their minority stake in the 380-restaurant chain.

Davis, who also owns stock in Pop-up Bagels, has a straightforward strategy for creating successful restaurant brands: enlist the help of his network of reliable investors, which includes Phelps, actor Samuel L. Jackson appoints his own management team, hires a celebrity to help represent the brand, and takes the largest ownership stake with celebrity investment advisor Paul Wachter (“we just go from deal to deal”). With Dave’s, Davis accomplished this by persuading Phelps, with whom he had collaborated at Wetzel’s and Blaze, to manage the company rather than retire.

Almost all of Blaze’s management team was retained by Dave’s when they started franchising right after the deal.

Technomic, a data collector for the restaurant industry, reports that Dave opened six more restaurants the following year after opening his second in 2019. They specifically targeted franchisors who had previously owned a Blaze, Wetzel’s, or other fast-casual eatery. A number of executives, including Bitticks and Dave’s CFO James McGehee, were assisted by Phelps in purchasing franchise locations; Bitticks currently owns three and intends to open two more. Together, the founders of Dave’s now own seven locations.

By 2022, Dave’s had opened almost 100 locations, many in California, a year after announcing rapper Drake as its major celebrity backer. According to Davis, Wachter’s client Drake helped bring him into the deal. With their expansion into 46 states and seven countries, they have since more than tripled that number. According to Technomic data, Dave’s systemwide sales increased to $617 million last year from $392 million in 2023. Sales in 2020 came to just $22 million.

It is not unusual for trendy eateries to outgrow their brick and mortar locations too quickly and then suffer when they become outdated. This is the case with Subway, which closed almost 25% of its locations over the previous ten years before being purchased by Roark last year for more than $9 billion. Last year, 30 locations, or 10% of its total stores, were closed by Blaze, Phelps and David’s former business, according to Kevin Schimpf, senior director of industry research at Technomic. Additionally, Blaze’s sales decreased from $400 million in 2023 to $357 million in 2024. When asked if their chain is concerned about expanding too rapidly, Dave’s leadership responds dismissively.

“We have a great understanding of this business,” Bitticks of Dave’s says. We will open about 155 restaurants this year, up from about 80 last year, and then close to 165 or 170 next year. We can sustain growth like that. “”.

The business doesn’t worry about rivals. “We’re going to be rich,” Phelps says after eating their spicy chicken sandwich at a Popeye’s. He cites his two young adult sons’ eating habits as evidence that he is unfazed by well-known brands like Chick-Fil-A and Raising Cane’s. He claims that they dine out twice a day. You don’t have to limit yourself to either Dave’s or Raising Cane’s for your one meal out this week. “”.

Even though they’re discussing a big game, Dave’s is still a minor player for the time being. Although Technomic data indicates that the figure is closer to $2 to $5 million, Phelps estimates that the average Dave’s restaurant generates about $3 million in sales annually (EBITDA margins range from 18 to 20 percent). This is more than Popeyes, which had average sales of $1.09 million at its 2,400+ locations last year. However, Dave’s sales are insignificant when compared to some of its fiercer rivals: Raising Cane’s reportedly achieved $6.02 million in average unit volume last year, while Chick-Fil-A averaged $9.3 million at its drive-thru and free-standing locations.

Five years ago, when Dave’s had only fifteen locations, Roark started to make inroads. Since the brand was being courted at conferences and, in Phelps’ case, even once on the golf course, the owners joked that the private equity firm was “stalking” the brand.

After initially accepting the deal in January, Bitticks claims that the owners hurried to close the deal through a “truncated sales process” because they were intrigued by the $1 billion offer and concerned about Trump’s tariffs and the resulting economic uncertainty. Gordon, the restaurant analyst, agrees, saying, “The [mergers and acquisitions market] has been very quiet.”. “Eating out is a form of entertainment,” Gordon adds, which is another compelling argument for Dave’s to close the deal right away. “When the idea is popular, you must sell. “What is popular one day might not be popular the next.”. Additionally, Dave’s, a company with a strong tradition of following trends, might be especially susceptible to shifting cultural trends.

For his part, Davis claims that he had a major say in Dave’s owners’ decision to cash out at that time. He asserts, “We have to look out for our investors and give them the chance to do what they want.”. “What I advised them all to do was to leave when matters were ideal. Roark’s experience, he continues, will “open up” Dave’s to international markets, in which his team is less experienced. “This idea is going to be very successful abroad.”. “.”.

The rights to establish over 1,000 franchise locations in the United States have already been sold by Dave’s. S. the United States. The K. over the following five years, including Canada and the Middle East.

Dave’s founders and executives maintain that they are not leaving anytime soon, even in the midst of the joyous procession surrounding the sale. Now that the Roark deal is over, none are legally required to remain, but they all declare that they intend to. Dave’s chief culinary officer is Kopushyan, and Oganesyan continues to serve as chief brand officer. They point out that they still own several franchise locations and a portion of the brand. According to them, since Dave’s headquarters was established seven years ago, none of the 55 current employees have left the company.

Regarding the clients who might be worried about Dave’s future under private equity: “Oh, when you guys get a store, the quality is going to go down,” people said during our entire journey, including when we were in the pop-up. People were saying, “Oh my gosh, the franchising quality is going to go down,” when we started franchising, according to Oganesyan. “People were like that at every turn.”. And I believe that the message I was always trying to convey to people was that quality would never decline as long as the brand’s founders and employees care about the food and the experience. “.”.

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