Franchise Times named the Larry H. Miller Company’s investment in Swig the Deal of the Year, an honor that highlights excellence in mergers and acquisitions in the franchise space.
With her five kids age 5 to 15 buckled in the car, Nicole Tanner used to stop by the local Sonic to get soda “all the time because they had the good pebble ice,” but she realized “there was something missing in the experience, or your cup was gray and maybe smelled like onions.”
She envisioned something better: “A superior product. A fast-moving line of amazing customer service, where I see you as a person.” And so in April 2010, Swig was born in St. George, in a valley in southwestern Utah surrounded by dunes and red sandstone cliffs. It served specialty soda pop drinks in a drive-thru format.
“It started out slow” because no one knew the name, which she chose after looking up the word “drink” in a thesaurus and considering the 30-plus synonyms. “Swig just jumped out,” said Tanner, sitting in a conference room in Lehi, part of Salt Lake City, where Swig’s new offices are under construction, surrounded by snow-capped mountains. Back then everybody asked her, “how do you make enough money to live off of fountain drinks?”
The answer appeared in March 2013, after a write-up in a Salt Lake City magazine naming Swig in St. George a must-stop for spring breakers. “I was protecting it, taking care of it, and seeing my customers out there daily,” she said.
Then Swig was off. “We were slammed. We had lines wrapped around both stores. We brought in financial and business partners, and we grew from two stores in 2013 to 17 stores until 2018, when I met Andrew and Shauna.”
That’s Andrew and Shauna Smith, at the time restaurant franchisees in Lehi. They formed private equity firm Savory Restaurant Fund, which Andrew heads, in partnership with the Mercato Fund. Savory’s management group helped Tanner and her team grow to nearly 50 units.
Last year, Utah’s best-known family office, The Larry H. Miller Co., came calling. The company is a former owner of the Utah Jazz NBA team and the country’s second largest auto dealership. Led by Gail Miller, Larry Miller’s widow, the firm bought a 75 percent share in Swig “for nine figures,” as Andrew Smith says, not revealing which nine. “It’s between $100 million and $1 billion.” Savory and Tanner, plus her two business partners, retain a minority share.
“It was a big figure for some soda,” Andrew Smith said, marveling at the lines and the raving fans and the sales numbers. “It’s bonkers.” But “the first time I met with Nicole, I didn’t get it. I remembered I would go to 7-Eleven” and buy a cheap Big Gulp of Coke as a teen. “Then I saw the business myself. Now I’m being taught if I’m a busy mom and I have five kids, I don’t want to bring them into a 7-Eleven and buy $40 more in candy bars.”
Now brands selling “dirty” beverages like bubble tea and fountain drinks infused with flavors are popping up everywhere. “Swig was the first one, in 2010. It didn’t exist,” he said. “We have so much white space. There’s an opportunity for thousands of units, but also, they’re not eager to pump and dump. That is not LHM.”
David Smith is managing partner at The Larry H. Miller Co. “They’re the real deal. They’re a phenomenal team. That was very clear from the first time we met with the management team, with Nicole and the other managers there,” David Smith said.
“You can’t fake culture, and it was very, very apparent from the first time we met with them that they have something very, very special there,” he added. “It’s woman-owned, woman-managed. With us also being woman-led by Gail Miller, there’s a natural fit there.”
Two years ago, LHM sold its majority stake in the Utah Jazz and later sold its auto dealership empire, leaving it with “a lot of capital,” Smith said. “We’re constantly out looking for great opportunities to put money to work in amazing” companies.
Swig is the only restaurant in their portfolio so far. “But we own the biggest movie chain in Utah, Megaplex. We still own the Salt Lake Bees,” the minor league baseball team. “So, we understand taking care of the customer. As well, we put Swig into all of our theaters. Our customers really love it.”
Shauna Smith, CEO of Savory’s management company, can relate to Tanner’s story. She was a stay-at-home mom with a 1-year-old and a 7-year-old when she decided she would open a restaurant and chose Kneaders, a franchised bakery-café, because she wanted one in her community and thought other moms would, too.
“Our moonshot was five,” she said, meaning their original goal for Kneaders, and then 15 and then 50. At one point Andrew Smith resigned from his role leading a tech company to join the restaurant operation, which ultimately had Kneaders, Little Caesars and R&R Barbecue under the umbrella, more than 70 stores in all.
“Then we met Greg Warnock,” whom Andrew calls “Gandalf. He’s older, wiser,” she said. Warnock is also a tech entrepreneur and owner of Mercato Partners in Salt Lake City.
They started Savory Restaurant Fund, which poured more capital into Swig and has since added nine other brands and is on the lookout for more. Swig is Savory’s first partial exit, and they’d like to create more when brands near the 50-unit mark.
“Our superpower is five to 50,” she said, meaning favored unit count when Savory buys a brand to when it sells. She calls that “Chapter 3” in a three-chapter book. “That’s when they’re ripe for the next buyer.”
She praises Gail Miller and the investment team. “Women like Gail Miller, she’s changed the game for women in business. She’s serious, she’s decisive. She also brings a softness to business, a kindness. I look at her as the mother of Utah.”
Swig stores do “$1 million AUV on a 650-square-foot store. Our Arizona stores do $2 million,” he said. Cost of investment is about $600,000 per unit, and they’re selling five-unit deals. People tell him this will only work in Utah, but he disagrees. “Swig can go coast to coast.”
The prospect is both beautiful and daunting to Tanner, Swig’s founder. “I do believe Swig is meant to be everywhere,” she said, holding a giant hot-pink “Swig” cup that she fills with water all day until her afternoon treat, a trip to the Swig store in nearby Orem. (Later at that store, she makes herself and her guest “The Founder,” named for Tanner, naturally: Diet Coke with a lime and a shot of coconut cream, filled to the brim with ice—delicious!)
Keeping the Swig culture will be her focus as it grows. “I think about that every night. I’m going to make sure we do it right. I want people to feel it’s their Swig.” Her relationship with Gail Miller will be key to those efforts, she said, especially Miller’s interest in Swig’s charity, Save the Cups.
Tanner is a breast cancer survivor, diagnosed when she was 37, with five kids, both she and her husband between jobs and without health insurance. Her medical bills piled up, and afterward an anonymous donor paid them. She started Save the Cups to do the same for others, and she selects recipients from applications and funds them with donations through Swig.
“My perspective became, go out and live your life because life is short,” she said about that time. The next year she started Swig. “I just hoped one store would work. Please, please let this work,” she said she prayed back then.
Now she’s 51, with a sensation on her hands. And she thinks: “Is that real? Is that my life?”
