Investors had been looking forward to earnings from Zoe’s Kitchen (NYSE:ZOES) last week. Instead, the company’s earnings were delayed., and ZOES surprised investors by announcing that it had received a buyout offer. If the proposed deal goes through, a private restaurant chain will acquire all outstanding ZOES stock for $12.75 per share.

On the one hand, that seems like good news. The offer comes at a sizable premium to the $10 level where ZOES stock had previously been trading. On the other hand, ZOES stock had an IPO price of $15 per share in 2014, immediately traded higher, and went on to peak at $45 per share. So against that backdrop, a $12.75 offer is rather sour.

Why ZOES Stock Fell So Far Previously

Zoe’s Kitchen has faced a deluge of trouble since it went public. Some of these problems were industrywide in nature. For example, consumer spending patterns have shifted in recent years. Consumers have spent more money on high-end dining or more local and unique offerings, eschewing a lot of mid-priced chains. Veteran nationwide brands such as Applebee’s (NYSE:DIN) and Brinker’s (NYSE:EAT) Chili’s have faced years of ongoing same-store sales declines.

ZOES has not been immune to this trend. Despite offering a Mediterranean menu that is quite different from the usual burgers, pizza, and chicken cuisines of many of its peers, Zoe’s has lost many customers as well. Its sales have trended downward in recent years, and apart from one marginally positive quarter, its same-store sales have remained negative. In the first quarter, the company’s revenue declines accelerated, leading to a major drop in ZOES stock recently.

That’s because, while ZOES has continued to struggle, other restaurants have turned the corner. Major pressures on the sector, including rising minimum wages and surges in food prices, have started to abate. Meanwhile, traffic is picking up for the first time in several years. Staid chains such as the above-mentioned Applebee’s and Chili’s have seen their stocks go up 50% or more in recent months. Meanwhile, leading fast casual plays such as Chipotle (NYSE:CMG) and Habit Restaurants (NASDAQ:HABT) have surged by even larger amounts.

So while Zoe’s can blame industry struggles for its slump in 2015-17, that excuse is growing tired. The industry has turned the corner, but ZOES stock was still lingering near its all-time lows before privately-held restaurant group Cava stepped in with its buyout offer.

Why Cava Wants to Buy ZOES

Zoe’s Kitchen is a seemingly good fit for Cava, as the latter company also operates a chain of Mediterranean-inspired restaurants. Its founders, three Greek Americans, opened a fast-growing “chef-casual” chain concept that launched in the Washington, DC area but which has since spread to almost 75 locations.

That said, ZOES has more than 250 restaurants. As such, the combined company would have sufficient scale to compete with other, larger, national fast-casual chains.

Cava, due to its diminutive size, doesn’t have the funds to execute the deal by itself. So, it turned to Act III Holdings for additional capital. Act III is noteworthy because Panera’s former CEO is involved with the firm. Panera was one of fast casual’s brightest stars before it was taken private, generating huge returns for longtime shareholders.

Will Someone Top Cava’s Bid?

That leads to the question: Is the smart money trying to buy ZOES on the cheap? Cava swooped in, funded in part with money from a former Panera executive, to try to buy up Zoe’s while ZOES stock was trading near its all-time lows. Are these qualified industry insiders ahead of the market?

The stock market is showing its doubts about the deal price. Zoe’s stock already traded above the $12.75 level on Monday, hitting as high as $13.05. Think about the implications of that for a second. People buying the stock at $13 are saying they are willing to lose 25 cents per share if the Cava deal goes through as planned at $12.75. That suggests there is a real chance that a higher bid will appear.

And it’s not hard to see how that could happen. ZOES stock was trading at $15 per share just last quarter. A lot of Zoe’s weakness has been due to management’s questionable business decisions. It has arguably spent too much time trying to carry out financial engineering using its franchising strategy, rather than sticking to blocking and tackling with the core business. While Zoe’s operating results have tailed off at existing restaurants, management has  remained heavily focused on opening new stores, potentially cannibalizing the stronger, existing locations.

ZOES Stock: Worth Holding for a Potential Higher Bid

When a company’s management is weak, any new buyer has a good chance of adding value. Cava is in the same direct niche as ZOES,  making it a good fit. But there are many private equity firms that would be willing to buy a solid restaurant concept. There should be plenty of bidders that would potentially be able to iron out the strategic flaws in Zoe’s business model and get things back on track.

Keeping that in mind, and noting that the stock was at $15 recently, $12.75 is quite the lowball offer. Another private equity shop could easily come in, pay $14 or $15 per share, and still get a business that looks cheap compared to its peers on a price-sales basis.

Will a higher offer come? I’d say the odds are under 50%, but the possibility is certainly out there. Based on Monday’s close at $12.88, an owner of Zoe’s stock is risking 1% if the deal closes as planned to potentially make 5%-15% more if a higher bid comes in. Given that Zoe’s bigger problem here seems to be its  management — not the actual restaurant concept — I wouldn’t be surprised if another private equity firm becomes interested in the company.

At the time of this writing, Ian Bezek owned EAT stock.