Category Archives: Franchise business

Franchising for the Greater Good

Nonprofit organizations and franchised businesses operate in separate worlds.  But sometimes those worlds meet in a way that can be mutually beneficial.  When the franchise benefits the mission of the nonprofit, the organization might consider forming a separate entity that will become a franchisee.  The arrangement is sometimes referred to as “social franchising”. Starting any new business is a risk.  Even a franchise business.  Not every nonprofit organization will be willing to expose a portion of its assets to business risk.  But in some cases, and with proper legal advice, the arrangement can work. Here’s how it’s done: The nonprofit …

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Some Multi-Unit Franchisees are Public Companies

While most of the private equity and public offering activity of franchise companies focuses on franchise brands and systems, every now and then a large, multi-unit franchisee will go public or seek private equity financing. Public company franchisees may trade at lower multiples than those of franchisors because the franchisees do not control the brand. But publicly-traded multi-unit franchisees can nevertheless be significant companies in their own right. Publicly-traded franchisees include the following companies: Carrols Restaurant Group trades on Nasdaq.  It owns and operates approximately 675 Burger King franchises.  Burger King, the franchisor, has an ownership interest of approximately 28% in the …

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Franchisor IPOs Were Strong in 2014

While private equity activity continued in strength in 2014, franchisors also launched initial public offerings (IPOs) in the last year. Recent IPOs of franchise companies include the following: Habit Restaurants Inc. – This franchisor of the fast casual Habit Burger Grill restaurants raised about $90 million in a Nasdaq IPO in November 2014. The Joint Corp. – This franchisor of chiropractic clinics raised more than $17 million in its Nasdaq IPO November 2014. El Pollo Loco Holdings Inc. – This Mexican chicken fast casual restaurant franchisor raised $107 million in its Nasdaq IPO in July 2014. The company did a …

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Private Equity Was Active in Franchising in 2014

In the last year, private equity continued to play an important role in franchising.  Private equity offers a franchisor with a growing franchise system a promising pathway to rapid growth.  An investment group can assist a franchise company strategically, tactically and with economies of scale. Private equity sees value in the ongoing royalty stream of a franchise system.  Franchised restaurants, hotels and retailers also typically have higher valuations than non-franchised businesses.  This point was brought home to me at the Capital Roundtable “Private Equity & Franchising” event in New York City in October 2014.  Using numbers from Capital IQ, Matt …

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The Largest Global Franchise Brands Are U.S. Restaurants

Franchising fared respectably in a recent rating of the most valuable worldwide brands across all industries.  McDonald’s was rated among the ten most valuable worldwide brands in Interbrand’s 15th annual Best Global Brands report.  While the report was top-heavy with technology companies, headed by Apple and Google, franchise brands held their own.  And these top franchise brands are all U.S. restaurants.  In addition to McDonald’s, KFC, Starbucks and Pizza Hut were among the 100 most valuable global brands.  Here are the ratings of these companies and Interbrand’s valuations: McDonald’s was in the top 10 at number 9, down from number …

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