How Cheba Hut Kept the Equity in a Notable $36 Million Royalty Deal
Cheba Hut secures $36 million royalty deal, maintaining brand control while monetizing its IP.
auto_awesome
Cheba Hut Toasted Subs recently engaged in a $36 million royalty transaction with Diversified Royalty, allowing the brand to retain control of its operations and intellectual property. The deal, praised by CEO Marc Torres, preserves the company's growth trajectory with 83 locations currently in operation. It uniquely enables the franchisor to monetize existing value without giving up equity to private equity firms.
Why It Matters
This structure of royalty financing may impact how franchisees assess their own capital options, as it suggests alternative routes for liquidity while maintaining brand control. Additionally, this could signal potential shifts in access to territory as Cheba Hut continues its growth strategy.
Diversified Royalty, a Canadian firm, has successfully completed a notable $36 million royalty transaction with Cheba Hut Toasted Subs, enabling the franchise to unlock liquidity while retaining full control of its operations and brand. This strategic deal, finalized in June 2025, allows Cheba Hut’s founder, Scott Jennings, to monetize the brand’s intellectual property and trademarks without relinquishing any equity. Cheba Hut currently operates 83 locations, positioning itself for continued growth in the competitive sandwich franchise sector.
Marc Torres, the CEO of Cheba Hut, emphasized the importance of maintaining control through this partnership with Diversified Royalty, saying, "The No. 1 priority for us was to maintain control and to be able to apply the gas and brakes as we see fit.” The arrangement offers Cheba Hut the liquidity it sought without the downsides typically associated with private equity buyouts, which Jennings was averse to based on anecdotal experiences of others.
