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23.5° was founded by Anil Patil, a former barrister who left legal practice to build a successful 18-site Domino’s Pizza franchise (sold in 2013) and Mark Hepburn, whose 25-year career in franchising includes working with brands such as Burger King, Wimpey and KFC.
Anil and Mark met with several interested parties, but some of the investors were struggling with franchising and the ultimate relationship with a franchisor.
CC understood the concept immediately and their business
model of high net worth individuals investing meant that they were not subject
to restrictions placed on other PE houses.
Relationship Director Mikael Rosen and Director of
Structured Finance, David Moxham led the Royal Bank of Scotland’s deal team.
Mikael said, “We are extremely pleased to be supporting 23.5 Degrees Ltd with
£9.75m debt facilities to help achieve its strategic growth ambitions alongside
Connection Capital. We are excited to be working with such an experienced and
dynamic management team that are being backed by a leading global brand in
Starbucks.”
Mark Hepburn, Managing Director of 23.5° said, “This
investment will give us the capacity to deliver on our plans to extend and
expand our franchise network. As the franchise market continues to grow across
the UK, we will be able to capitalise on latent demand in under-served areas of
the country and help boost Starbucks’ UK market share.”
Commenting on their meeting Mike said, “I really like Anil
and Astrid, they are very genuine people. They told me about their history, the
opportunity, the terms on offer from the family office and to me it seemed that
they could do better. This was a couple who had great jobs but risked
everything and went into franchising. They made a huge success of Domino's,
made significant capital but saw the opportunity of being in early with one of
the World’s most iconic brands in a sector that some people would have thought
was saturated and went again, risking the capital they had already made. They
had assembled a great team around them and it felt as though the opportunity
should be one for private equity and the banks to support.”
Prior to the deal completion 23.5° operated 14 Starbucks
stores across six Southern UK counties – Berkshire, Oxfordshire, Dorset,
Hampshire, Surrey and Wiltshire, with another 16 new store openings in the
pipeline.
Starbucks – the world’s largest coffee chain and ranked 52
on Forbes’ world’s most valuable brands, has recognised 23.5°s contribution to its business by presenting it with two awards for delivering
impressive organic store growth, and for dedication to customer service.
Mark Hepburn, Managing Director of 23.5° commented, "We are hugely grateful to the Meridian team for helping us deliver this funding package. They became an integral part of our team, introducing us to CC and RBS and the advisers needed to guide us through what was an intense and complicated process."
The company has undertaken another round of funding as of
2018 in which Meridian once again participated.
Other advisers on the transaction included the Hampshire
based offices of Shoosmiths (23.5° legals relating to investment from CC), PWC
(Financial Due Diligence), Glanvilles (23.5° legals relating to purchase of
stores from Starbucks), together with Osborne Clarke (Bristol – acting for
RBS), Gateleys (London – acting for CC), Baker Tilly (Reading – tax advice to
CC and Newco) and Smith Cooper (Derby – Commercial due diligence).
