SPACs and Restaurants: Swimming with Sharks?

Is raising capital with a SPAC like swimming with sharks?

In many respects, raising capital through a SPAC (Special Purpose Acquisition Company) can feel like swimming with sharks, especially in the restaurant and restaurant technology sectors.

Here’s why:

1. SPAC incentives aren’t always aligned with the company’s.

   SPAC sponsors often earn substantial rewards just for completing a deal, even if the long-term performance of the merged company is poor. This can create pressure to close a transaction quickly rather than strategically.

2. Market perception can be skeptical.

   Many SPAC-backed restaurant and hospitality companies like BurgerFi and Clover Health  have struggled post-merger. Investors are now more cautious, associating SPACs with inflated valuations and weak fundamentals.

3. Public company demands can overwhelm operators.

   Restaurant founders accustomed to private growth cycles often find the quarterly reporting, investor scrutiny, and governance obligations of a public company (via SPAC) to be disruptive and costly.

4. Valuation compression post-merger is common.

   Once the SPAC hype fades, stocks often trade down sharply. For example, several restaurant and food-tech SPACs saw 50–80% declines within a year of going public.

That said, SPACs aren’t always predatory.

They can be useful if:

• You have strong unit economics and scalability that public investors can easily understand.

• Your leadership team is ready for public market discipline.

• You negotiate carefully to protect your equity and governance rights.

In short: a SPAC can be a capital-raising shortcut — but only if you’re swimming with a cage, not just confidence.

But maybe we should start at the beginning. For the uninitiated, let's define what a SPAC (Special Purpose Acquisition Company) is.  A SPAC is a publicly traded shell company created solely to raise capital and acquire or merge with one or more private companies, thereby taking them public with significantly fewer regulatory steps than a traditional IPO. investopedia+2

Why a SPAC?

SPACs, often called "blank check companies" are formed with no operations and go public to pool investor funds in an escrow account, intended for a future merger or acquisition. Investors bet on the expertise of the sponsors, and once a target company is identified, shareholders vote to approve the merger. If approved, the private target becomes a public company via the SPAC. If not, or if a suitable acquisition isn’t completed within a preset period, investor funds are returned. wikipedia+1

SPAC Impact on the Restaurant Industry

SPACs have increasingly targeted the restaurant sector, especially since the pandemic created both distressed assets and growth opportunities. Several SPACs, such as Tastemaker Acquisition Corp and Fast Acquisition Corp, were formed with the explicit purpose to merge with restaurant chains or related tech firms. Well-known examples include Burger King’s public listing via SPAC in 2012, Del Taco in 2015, and more recently, deals like BurgerFi and Pinstripes. aaronallen+4

SPACs have helped brands with expansion capital, improved liquidity, and rapid scaling, but also created risks due to faster deals and sometimes limited operational oversight. Some restaurant SPAC mergers have subsequently struggled; for example, Pinstripes filed for bankruptcy not long after its SPAC merger, marking a notable cautionary tale for the industry. Further, failed SPAC attempts, such as Allegro Merger’s bid for TGI Fridays suggest that market and operational challenges can derail such deals. restaurantbusinessonline+2

Current Restaurant SPAC Trends

• In 2025, SPACs comprised nearly 37% of all IPOs, continuing to serve as an attractive but risky pathway for restaurant brands seeking public markets or expansion. stout

• Restaurant industry leaders remain interested in SPACs to finance technology, delivery, and off-premise strategies, especially as consumer demand evolves post-pandemic. restaurantbusinessonline+1

• However, investor returns post-merger have often trended negative for restaurant SPAC deals, with increased scrutiny applied to deal structures, growth prospects, and long-term brand health. wikipedia+1

Overall, SPACs have provided substantial investment and transformation opportunities to the restaurant industry over the last few years, but their impact has been mixed—delivering quick access to capital for some brands while exposing others to heightened risk and market volatility. aaronallen+2