Kilwins, a specialty chocolate brand with more than 70 years of history, is part of Levine Leichtman Capital Partners’ portfolio following the close of a deal valued at more than $125 million.
Kilwins, known for making chocolate, ice cream and confectionaries, has been in business for more than 70 years. It’s a history Levine Leichtman Capital Partners, which purchased the concept in 2023, plans to capitalize on as it pushes exponential growth while maintaining the brand’s traditions.
Don and Robin McCarty purchased Kilwins in 1995, and in 2022 hired an investment banker to seek buyers as they were ready to step away from the business. Private equity firm LLCP was on the list.
“We’re very active in the franchise space, so we like to hope whenever there’s a process like this, even if it’s limited, that our names are going to show up,” said firm partner Andrew Schwartz. “We felt fortunate to be included in this process and were very excited about the opportunity to meet with Don and the rest of his team.”
Negotiations began in November 2022 and ended in February 2023 when the deal closed. It was a smooth process, said Schwartz, thanks in part to a reasonable seller.
“There were some complexities, but we worked together and it felt like we were already on the other side of the deal,” Schwartz said. “We were troubleshooting this stuff together, rather than it being a more difficult negotiation, which we’ve experienced as well.”
Brian Britton came on as president and CEO of Kilwins after the acquisition by Levine Leichtman.
What intrigued the LLCP team about the deal, valued at more than $125 million, was the chance to introduce more customers to the chocolate retailer.
“At the core of it, Kilwins is an unbelievable brand,” Schwartz said. “Anyone who knows it will say they love it and they grew up on it. At the same time, there are a lot of people who don’t know the brand in this country. That’s the opportunity we saw. There’s a really strong base of stores in the Midwest and Southeast, but massive areas of the map don’t have Kilwins.”
The brand, founded in 1947 by Katy and Don Kilwin in Petoskey, Michigan, has more than 160 locations in 29 states. Now with LLCP, Schwartz said the goal is to put the pedal to the metal on new unit development. Kilwins CEO and President Brian Britton, who was brought on by LLCP, said the growth strategy is to develop units in existing and new markets.
“We’ve stepped up our lead development and marketing to be able to generate more leads,” Britton said. “That’s already happening and we’ll continue to build it over time. We’ve also brought on another partner to help us with site selection and real estate development. We believe that we have partners who are best in class.”
Britton said brand leadership is focused on updating the post-of-sale system, building a larger digital presence and revamping the company’s loyalty program. The expectation is to build up the brand with these efforts before selling off the concept several years down the line.
Andrew Schwartz
“Our standard expected hold is usually in the four- to five-year time frame, which is typical for private equity,” Schwartz said. “We’re now a year in and have had some nice growth in the first 12 months. I think at this point we’re probably looking at an exit in 2027 or 2028.”
That growth, however, must be balanced and carefully done, Schwartz said.
“You can almost break a brand in trying to grow it too much,” said Schwartz. “The core tenants for us that is critical in any franchise investment is you have to do what’s right for the franchisees and what’s right for the customers. If you continue to do those things, you will be successful in whatever your growth objectives are.
“If you start selling units that are too close to each other, there might not be enough business in that territory,” Schwartz said. “It might be initially good for the franchisor because of more royalties, but eventually franchisees will take a hit. Do right by the franchisees, help them grow, that’s the most important thing.”