Freeman Spogli & Co. has acquired a majority stake in fast casual Mexican restaurant chain Cafe Rio from KarpReilly. The target's management team will keep a stake in the company. Demand for ethnic flavors is one of the drivers in restaurant M&A.

Cafe Rio was founded in 1997 and is based in Salt Lake City, Utah. The chain is known for making made-from-scratch dishes such as burritos and tortillas that use traditional Mexican ingredients. Cafe Rio operates more than 100 restaurants in 11 states mainly on the West coast. KarpReilly invested in the company 2004. Financial terms of the deal were not disclosed.

"Through our new partnership with Freeman Spogli, we will be able to leverage their team’s extensive experience growing restaurant concepts as we look to expand Cafe Rio in both existing and new markets," says Cafe Rio CEO Dave Gagnon.

Freeman Spogli is a Los Angeles-based private equity firm that invests up to $150 million in businesses across the consumer and distribution sectors. The firm has previously backed restaurant chains City Barbeque and El Pollo Loco.

Buyers are showing an appetitie for ethnic restaurants, as consumers want food that reflects their diversity. Curry Up Now acquired Tava Kitchen; General Atlantic made a minority growth investment in fast-casual operator Barteca Holdings; and Burger King owner Restaurant Brands International Inc. agreed to purchase Popeyes Louisiana Kitchen.

Piper Jaffray Cos. (NYSE: PJC), Ropes & Gray LLP and Kirton McConkie PC advised the sellers. Morgan Lewis & Bockius LLP represented Freeman Spogli.

Cafe Rio

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Demitri Diakantonis

Demitri Diakantonis

Demitri Diakantonis joined SourceMedia in 2015 and serves as Managing Editor of Mergers & Acquisitions. He covers all aspects of middle-market deamaking, with a focus on strategic buyers and the consumer and retail sectors, and writes The Buyside column.