Didn't PE despise franchisees?
I recollect 10yrs ago that nobody wanted to touch franchisees (no autonomy, top-line royalty drag, limited exit options, system dependency).
However, as the PE world has continued to mushroom, the appetite for investing in franchises has grown.
Franchises, it can be argued, are lower risk: established brand, proven playbook, cash cow characteristics, built-in ecosystem of operators and exit opportunities (other franchises).
Independent sponsor Justin Turner has had success investing into franchises. He states that you can acquire franchisees at 30% discounts compared to independent companies with similar profiles and metrics. Lower entry valuation + Lower risk = 🤌🤑
Terminology, lettering is very important, for everyone's benefit:
-Franchisor: HQ, the owner of the brand & IP, leader of the playbook, asset-light, director of the orchestra, business model is receiving royalties. (PE has loved franchisors forever.)
-Franchisee: The operator, in the field, single- or multi-location (multi = rollup potential), feeds best practices to HQ, pays royalty (3-10%). (PE has been skeptical to franchisees.)
-Franchise: The catch-all phrase for the system & concept.
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