Whataburger sells majority ownership stake to Chicago investment firm

Whataburger’s founders, the Dobson family, will have a minority ownership position in the company. President and CEO Preston Atkinson and board chairman Tom Dobson will keep their seats on the board, but will retire from daily operations. less Whataburger’s founders, the Dobson family, will have a minority ownership position in the company. President and CEO Preston Atkinson and board chairman Tom Dobson will keep their seats on the board, but will ... more Photo: Eric Gay / AP Photo: Eric Gay / AP Image 1 of / 77 Caption Close Whataburger sells majority ownership stake to Chicago investment firm 1 / 77 Back to Gallery

Chicago-based BDT Capital Partners said Friday it’s agreed to acquire a majority stake in Whataburger.

The burger chain will remain headquartered in San Antonio, and the groups will “begin exploring expansion plans,” they said in a statement.

Whataburger’s founders, the Dobson family, will keep a minority position in the company. President and CEO Preston Atkinson and Chairman Tom Dobson will retain their seats on the board but retire from daily operations.

Both will turn to running Las Aguilas, an investment company launched by the Dobson family in 2011 that focuses on real estate and philanthropy.

The decision “is both exciting and bittersweet” for the family, Tom Dobson said.

On ExpressNews.com: San Antonio-based Whataburger hires Morgan Stanley to ‘explore our options’

“Whataburger has been the heart and soul of our family legacy for nearly 70 years, but we feel really good about the partnership with BDT,” he said.

“They have a track record of success with businesses as special as ours that want to grow, while preserving culture and family history. They are trusted advisors and partners who have worked closely with other family businesses and they have a tremendous reputation for doing the right thing,” he added.

Ed Nelson, Whataburger’s chief financial officer and controller, will become president. Several other company executives are also being promoted.

“Whataburger has grown significantly over the years,” Atkinson said. “In order to keep satisfying our customers, we’ve been exploring different options to expand the brand and introduce it to new audiences.”

Whataburger confirmed last month that it hired investment banking firm Morgan Stanley to help the company figure out how best to fuel its expansion.

“Our company is growing and is always attractive to investors, and we’ve brought in Morgan Stanley to help us explore our options,” a Whataburger spokesperson said in an email. “We have always evaluated the opportunities that can accelerate growth and maintain the success of our brand, and we will continue to do so in the future.”

Whataburger is the latest in a line of San Antonio companies bought by a private equity firm or lost to an outside merger within the past three years.

Ohio-based refiner Marathon Petroleum Corp. bought Andeavor, formerly Tesoro, in 2018 for $23.3 billion with plans to operate its headquarters in Ohio.

C.H. Guenther & Son Inc. sold to Chicago private equity firm Pritzker Group in April 2018 in a deal reportedly valued at $1.4 billion.

Rackspace Hosting sold to New York private equity firm Apollo Global Management for about $4.3 billion in late 2016.

Convenience chain operator CST Brands Corp. also sold that year to the Canadian owner of Circle K, Alimentation Couche-Tard Inc., for $4.4 billion.

Is San Antonio losing another headquarters?

No, said Bexar County Judge Nelson Wolff. The Whataburger sale differs with other recent company sales in that the equity firm is keeping the chain’s operations and ownership structure in San Antonio, Wolff said. Compare that with Couche-Tard and Andeavor, which moved headquarter operations elsewhere, he said.

The purchase is more akin to Apollo’s purchase of Rackspace. Though Rackspace has gone through rounds of layoffs in recent years, the company has also added jobs “in other places,” Wolff said.

Wolff said he expects BDT will take Whataburger public within the next few years.

“And so, by investing in them, you’re saying, ‘I believe we have a great future, I want to put my money available to the company and I want to see you grow,’” Wolff said.

Wolff added, “Now, all that pans out in the future. We’ll see how that goes.”

Harmon Dobson and Paul Burton founded Whataburger in 1950 in Corpus Christi, where the fast food chain would operate for six decades.

But by 2008, the burger company had outgrown its Corpus Christi headquarters. Whataburger executives also grew increasingly nervous about the damage wrought by recent hurricanes on the Texas coast. The fast food chain already had to shut down its Corpus operations more than once because of storms and set up temporary headquarters in San Antonio.

Lured by San Antonio’s larger workforce, Whataburger moved its headquarters in 2009 to its current building near Jones-Maltsberger Road and U.S. 281 — previously the home of refiner Tesoro Corp.

Since then, Whataburger has cemented its place as a Texas icon with a vast cultural cache. The burger chain used social media to cultivate a devoted following — gaining 1.3 million followers on Twitter with its casual, conversational tone.

Whataburger obsessives now host social-media-ready birthdays, engagement photo shoots and, yes, weddings at the chain’s restaurants.

Customers regularly steal the chain’s orange-and-white table tents bearing order numbers as mementos — or to sell them on eBay.

The question “Whataburger vs. In-N-Out” often provokes passionate responses against the popular California chain.

Whataburger has used that following to branch into other ventures. In 2013, Whataburger teamed with San Antonio grocer H-E-B, another cult favorite among South Texans, to sell the fast-food joints’ fancy and spicy ketchups, pancake mix and Whatafries and other products on the retailer’s shelves. Whataburger opened a drive-thru at one of H-E-B’s convenience stores in 2017.

The brand has even spilled into Texas politics. Last year, Whataburger unwittingly became a fixture of former U.S. Rep. Beto O’Rourke’s failed bid to unseat U.S. Sen. Ted Cruz as the Democratic candidate live-streamed himself skateboarding in one of the chain’s parking lots, speaking with restaurant customers or going on drive-thru runs after televised debates.

O’Rourke’s co-opting of the brand led a Cruz spokeswoman to label the El Paso congressman a “Triple Meat Whataburger liberal” — a move that drew mockery on social media.

The company operates more than 820 locations, with over 670 in Texas alone. Whataburger’s other locations are in the South and Southwest, including Alabama, Arizona, Arkansas, Florida, Georgia, Louisiana, Mississippi, New Mexico and Oklahoma.

Most of its restaurants are company-owned, but that would change if Whataburger re-franchised the bulk of the chain, reflecting a trend playing out in the fast food industry.

The company’s current set-up requires it to pour money into building, staffing and running its restaurants and covering operating expenses, said franchise consultant Richard Adams, who primarily works with McDonald’s franchisees.

Through re-franchising, a company can shift those costs to franchisees and return more cash to shareholders, he added.

It also moves the burden of finding workers, a struggle across many industries in today’s tight labor market, to the franchise owners. They are often more closely connected to the community than corporate owners and may have an easier time finding and retaining staff, Adams said.

It’s a change other fast food chains such as Burger King and McDonald’s have made, enabling the companies to trim their costs and raise their bottom line, Adams noted.

Madison.iszler@express-news.net