Butterfly Equity merges two restaurants to marry back-end technology

Butterfly Equity, a private equity firm formed by ex-KKR and Vista Equity executives, is combining two of its portfolio companies into one platform as it works to grow and enhance the technology behind the healthy eating restaurants.

The Los Angeles-based PE shop that invests in the food sector merged Lemonade Restaurant Group with Modern Market Eatery.

Modern Market Eatery, a casual farm-to-table restaurant chain, and Lemonade, which offers California-inspired healthy and affordable options, will share product sourcing, a supply chain system and an online order and delivery platform. The combined company will operate under the Modern Restaurant Concepts brand name, Anthony Pigliacampo, co-CEO and co-founder of Modern Market Eatery, told Buyouts.

As part of the deal, Pigliacampo and Rob McColgan, co-founder and co-CEO of Modern Market Eatery, will lead the combined entity.

KKR, a long-time backer of Lemonade, will contribute its investment in the company to the merger and will also become a shareholder in the new company alongside Butterfly and the management team.

The merger made sense from an operational standpoint as both companies have similar back-end technology, according to Pigliacampo. Besides that, both companies have shared some of the same board advisers.

Butterfly has been investing in both Lemonade and Modern Market Eatery to build and scale their digital platforms responsible for online ordering, online processing, and delivery. Now, with the merger, Butterfly will invest in one shared platform for the combined company, instead of two separate, Pigliacampo explained.

“Both companies have to put together a supply chain and work together on sourcing where there is an overlap,” he said. “There is a series of services that are going to be shared… from customer experiment integrated [online] to a third party delivery system.”

The new platform will have a combined footprint of 58 restaurants across 10 markets including Denver, Austin, Dallas, Phoenix, Washington, D.C., Maryland, Los Angeles, San Francisco, San Diego and Orange County.

Both companies have 70 percent of all transactions “consumed” outside of restaurant, either through take-out or delivery, Pigliacampo said. This trend has changed traditional business development in the restaurant space, putting more pressure on digital experience.

“It’s not just about making a beautiful restaurant, but also a beautiful experience,” he said.

Currently both companies invest in web-order management technology and supply chain systems as well as in software systems that can predict order flow in real time.

Brands like Starbucks and Panera Bread have been investing significant amounts in this technology, Pigliacampo said, but smaller vendors are “stuck” in keeping up.

“You need the technology to be smart and to be able to help your restaurant to deliver orders in time,” he said.

As part of the merger, Larry Kurzweil, most recently CEO of Lemonade, will resume his role as operating partner of Butterfly and adviser to the company.

Jim Sullivan, former chief development officer of Carl’s Jr. and Hardee’s parent CKE Restaurant Holdings, will join Modern Restaurant Concepts as chief development officer.

Butterfly Equity and KKR declined request for comment.

Action Item: To contact Butterfly Equity in Los Angeles call: 310.409.4994.