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

After Dave sells 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.

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

Dave Kopushyan, 34, and Arman Oganesyan, 33, are two of Dave’s four cofounders, and they appear to be heading to or coming from a major night out. Cook Kopushyan, the namesake of the brand, is stylishly dressed in blue-washed jeans with black stars on them and a white T-shirt. Oganesyan, on the other hand, 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 reveal 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. Following the interview, they will board a private aircraft to return to Los Angeles from Teterboro Airport.

In 2017, brothers Tommy and Gary Rubenyan, along with Oganesyan and Kopushyan, founded Dave’s. They were all high school dropouts and the children of Armenian immigrants who grew up in East Hollywood. In a parking lot close to their childhood home, they launched the company as a pop-up. Their Nashville-style chicken with a cayenne coating, available in six different levels of spice (the hottest, “The Reaper,” requires customers to sign a waiver), 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.

Once so impoverished that they claimed to have had difficulty raising the $900 required to open the first Dave’s popup, the four cofounders are now wealthier than they could have ever dreamed. Before the sale, each of them 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 money back, even if you accidentally send it to someone. (Oganesyan, Dave’s chief business officer and a former stand-up comedian, shared a picture of himself sitting on the hood of an electric blue McLaren the day before the Roark deal was announced. He captioned the photo, saying, “I’m patiently waiting for all my relatives in Armenia to call for money.”. “”.

Compared to their previous cash out, this is a significant increase. 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 has since become a well-known food investor. Previously, the two collaborated on Blaze Pizza and Wetzels, which Phelps founded. It was the boys that captured my heart. Davis, who says he was aware of them from the start, says, “There was something about them: This is a $1 billion company.”. “.”.

It was actually Phelps and Davis who made it grow so quickly. Although the two collaborated on the other two restaurant concepts, this one is the most successful to date in terms of the company’s final valuation. The initial investment was multiplied by 250 for both Phelps and Davis. At the time of the sale to Roark, Davis and Phelps held approximately equal shares in the business, making them the biggest shareholders. Davis says he kept some of his ownership stake after the sale, but he declined to share it. In addition to refusing to disclose his ownership stake, Phelps 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. “The average bonus for the support staff up to the position of assistant restaurant manager was roughly $100,000,” COO Bitticks continues.

In order for Dave’s to reach its current state, many things had to go right. The founders’ wise wager on chicken was a significant contributing factor. “Chicken and coffee are the two most popular new ideas in the restaurant industry,” says John Gordon, founder of Pacific Management Consulting Group and an expert in the restaurant business. In 2010, chicken became the most popular meat in the United States, surpassing beef. A. as stated by the U. 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.

According to Oganesyan, this emerging trend was the reason he approached his middle school friend Kopushyan in 2017. At first, it was difficult to sell. While working as a vegetarian at Elf Cafe, a vegetarian restaurant on Sunset Boulevard, Kopushyan had previously been a line cook at renowned chef Thomas Keller’s Bouchon restaurant in Los Angeles. Oganesyan persuaded his friend, however, after a month of lobbying, and he created a recipe that he claims 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 very tenacious. 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.

Dave’s became an overnight sensation after receiving a fantastic review from Eater LA, a local food blog, five days after opening. They launched their first restaurant in East Hollywood within a year. Though it is located 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.

Phelps claims, “It was the cult following.”. There would be two-hour lines for that store because of the [Eater LA] article they made on Instagram, which brought in a ton of customers. In the beginning, the brand mainly relied on Instagram to market its goods. However, it has also gained popularity on TikTok, where posting videos of oneself eating and expressing opinions about Dave’s fries, sliders, and nuggets is popular.

The founders say that investors showed interest right away, which is not surprising. The majority of the questions were dismissed, but one in particular caught their attention: a post-it note left with the manager of the restaurant. “It simply stated, ‘Founders call John Davis,'” remembers Kopushyan.

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. Wetzel’s Pretzels, a rival to Auntie Annie’s that was started by Phelps and Rick Wetzel, was acquired by Davis in 1997. In 2008, Davis and his investment group sold their share of the company for $36 million. After becoming two of the first investors in Blaze Pizza, another restaurant concept started by Wetzel and his wife Elise, in 2012, Davis and Phelps reunited. For an estimated $250 million, they sold their minority interest in the chain of 380 restaurants in 2017.

Davis has a straightforward strategy for creating successful restaurant brands. He is also an investor in Pop-up Bagels. He enlists his team of reliable investors, which includes Phelps, actor Samuel L. Jackson takes the largest ownership stake, appoints his own management team, and appoints a celebrity to serve as a brand ambassador 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.

Following the transaction, Dave’s started franchising with the assistance of a management team that was largely inherited from Blaze.

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 with prior fast-casual restaurant ownership, such as Blaze, Wetzel’s, or others. Bitticks and Dave’s CFO James McGehee were among the executives Phelps assisted in purchasing franchise locations; Bitticks currently owns three and intends to open two more. Together, Dave’s founders currently 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. Since then, they have more than tripled that number, growing to include 46 states and seven nations. According to Technomic data, Dave’s systemwide sales increased to $617 million last year from $392 million in 2023. Sales in 2020 came to a mere $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. Subway experienced this last year when it was purchased by Roark for more than $9 billion after closing almost 25% of its locations over the previous ten years. Kevin Schimpf, senior director of industry research at Technomic, claims that last year, 30 locations, or 10% of its total stores, were closed by Blaze, Phelps and David’s prior business. Additionally, Blaze’s 2023 sales of $400 million fell to $357 million in 2024. Dave’s leadership is contemptuous when asked if their chain has any concerns about expanding too rapidly.

“We have a great understanding of this business,” Bitticks of Dave’s says. Following the opening of 80 restaurants last year, we plan to open about 155 this year and nearly 165 or 170 next year. This type of growth is something we can sustain. “”.

The business is not concerned 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, “They eat out twice a day.”. It’s not like you can only go out to eat once this week, and that’s at Raising Cane’s or Dave’s. “.”.

Dave’s is still a small fry, at least for the time being, even though they’re talking big game. Phelps estimates that the average Dave’s restaurant makes about $3 million annually (with EBITDA margins ranging from 18 to 20 percent); Technomic data indicates that the actual amount is closer to $2 to $5 million. The average sales at Popeyes’ more than 2,400 locations last year were approximately $1.09 million, which is more than this. 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 it only had fifteen locations, Roark started to make inroads at Dave’s. Due to the constant courtship at conferences and, in Phelps’ case, even once on the golf course, the owners made a joke about the private equity firm “stalking” the brand.

Bitticks claims that after initially accepting the deal in January, the owners hurried to complete the transaction through a “truncated sales process” because they were so interested in the $1 billion offer and concerned about Trump’s tariffs and the resulting economic uncertainty. “The market for mergers and acquisitions has been extremely quiet,” agrees Gordon, the restaurant analyst. Additionally, Gordon asserts that “eating out is a form of entertainment,” 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 may be especially susceptible to shifting cultural trends because it is a company with a strong foundation in trends.

According to Davis, he had a major say in Dave’s owners’ decision to cash out at that time. He asserts, “We must look out for our investors and give them the chance to do as they please.”. “I advised them all to leave when everything was ideal. He continues by saying that Roark’s background will “open up” Dave’s to international markets, in which his team is less experienced. “This idea is going to be very successful abroad.”. “.”.

Over a thousand franchise locations in the United States have already been sold by Dave’s. A. the United States. The K. Canada, the Middle East, and the following five years.

In spite of the joyous procession surrounding the sale, Dave’s executives and founders maintain that they have no plans to leave anytime soon. Although none are legally required to remain after the Roark deal is finalized, they all declare that they intend to. Kopushyan serves as chief culinary officer, and Oganesyan continues to be Dave’s chief brand officer. They point out that they still own several franchise locations and a portion of the brand. They add that since Dave’s headquarters was established seven years ago, none of the company’s 55 current employees have left.

“Our entire journey, when we were in the pop up, people were saying ‘Oh when you guys get a store the quality is going to go down.'” This information speaks to customers who might be worried about what will happen to Dave’s under private equity. People were saying, “Oh my gosh, the franchising quality is going to go down,” when we started franchising, according to Oganesyan. “People were always like that at every turn. The quality will never decline as long as the brand’s founders and employees care about the food and the experience, which is what I believe I’ve always been trying to convey to people. “”.

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