From cookies to sandwiches, private equity is digging into restaurants

Private equity is no stranger to the restaurant industry.

Take, for example, Inspire Brands, the holding company behind Arby’s, Dunkin’, and a bunch of other fast food chains — it’s backed by Roark Capital, a private equity firm that, on its website, said that it manages $43 billion in capital.

But what actually happens when private equity gets involved in a restaurant chain? Consider a company like Insomnia Cookies, the maker of what Courtney Smith, co-founder of Ravenous describes as the “soulless private equity cookie.”

“Insomnia cookies is something a guy started in his dorm room in Boston,” Smith said. “It became a really big business, and eventually became something private equity invested in, and now it is massive, all over this country and many others.”

Last year, Insomnia Cookies opened their 350th location, with plans to open more than 75 new bakeries this year.

“Restaurants are very interesting to private equity for a lot of reasons,” Smith said. “One of them, is it franchise-owned? That is a very attractive model because you can squeeze a lot out of the margins if they're franchises.”

“Marketplace” host Kai Ryssdal spoke to Smith about her reporting, including a list of private equity-backed restaurant chains that she and her colleagues at Ravenous are tracking.

To listen to their conversation, use the media player above.