Patrick Stafford | 13 December 2012

Sumo Salad sells 60% stake to the Tulla Group

Fast food chain Sumo Salad has been bought out by one of Australia's wealthiest families, with the company now planning to triple its 100 locations and even pursue a float on the ASX as it grows beyond the restaurant category and expands its brand.

Sumo Salad, which was founded by Luke Baylis along with business partner James Miller in 2003, has sold a 60% stake to the Tulla Group, which is run by the wealthy Maloney family.

The company has also taken on more capital with the intent of expanding beyond the restaurant category – with the business even mentioning the possibility of taking on existing chains such as Subway.

And according to The Australian, Tulla will even pursue a float on the ASX within "four to five years".

"Tulla are extremely experienced, and their board position brings a lot of business acumen and intelligence to the company," Baylis toldSmartCompany this morning.

"They've given us a large amount of growth capital to expand our network – it's a great fit for what we're looking for."

Sumo Salad has been one of the bright spots in the otherwise challenged fast food category. The pair started the business after noticing a distinct lack of health food options in the market, and the franchise took off quickly – turning over at least $45 million when it was listed on SmartCompany's Smart 50.

The company has since grown extensively, with Baylis saying the company has experienced 16% quarter-on-quarter growth this year.

"From all reports, I hear the market is tough, but we're showing steady growth. We're in a second year where we haven't had a month of negative growth."

Sumo Salad was one of several food chains to benefit from growth following the financial crisis. Retail Food Group was another, as consumers switched to take-away meals under $10. The business has obviously also ridden the health food craze to success.

Part of the plans for growth under Tulla's leadership includes opening another 200 stores, including some smaller locations, which Baylis says have performed extremely well. Other plans include adding more hot products to boost winter sales and possibly putting products on supermarket shelves.

"We feel the Sumo brand has the ability to grow exponentially from that point," Baylis says.

Baylis wouldn't provide any details on the price of the deal, and denies this is his way out. "I have no intention of leaving, I remain as chief executive and managing director...for years to come, hopefully," he says.

Years is what it might take – the Tulla Group differs from other private equity firms in that its ownership is centralised within the Maloney family. This means it can hold on to investments for longer and pursue long-term strategies.

Maloney told The Australian he became interested in Sumo Salad after seeing chains like Whole Foods in the United States – "there's nothing like that in Australia".

"The closest thing with any size we could find was Sumo, so I think it's still a very much underdone market in Australia, and there's massive potential for growth," he said.

Whole Foods is an upmarket supermarket including various restaurant outlets – which indicates the scope of Baylis and Maloney's vision for the business. Sumo Salad's extra 200 locations will be rolled out over five years.

The current size of the business is "a wonderful base to build from", Maloney said.

Many of those locations will be franchises, although a number will remain corporate owned. Baylis said it's become more difficult to sell franchises in the past couple of years, as the space has become more competitive.

"There really has to be a fairly intelligent process on how you source franchisees, and how you meet the capital requirements and constraints."

The company was drawn into a franchise dispute last year,

The Maloney family, which has a fortune of about $560 million, started the Tulla Group in the 1990s. It recently won a $300 million payout from the sale of its stake in MAC Services Group. Mark Maloney, the son of original founder Kevin Maloney, now runs the business.

This article originally appeared on SmartCompany.

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