In a recent post in the Legal News section on JDsupra.com, Thomas Pitegoff says that 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,” Pitegoff writes.
Just as we share our vast point of sale experience and expertise with startup owners in order to help them make the best decisions from the very beginning, we at Sintel Systems are happy to share articles, advice and commentary about franchising growth trends.
Here are the highlights of “Private Equity Was Active in Franchising in 2014”:
• Pitegoff writes that private equity sees value in the ongoing royalty stream of a franchise system and that franchised restaurants, hotels and retailers also typically have higher valuations than non-franchised businesses.
• Pitegoff quotes figures from a Capital IQ presentation by Matt Kelly, of North Point Advisors which demonstrate that publicly traded restaurant, hotel and retail companies headquartered in the U.S. with a high percentage of franchised outlets tended to trade at higher valuations than those with just a few franchises: “In the group of companies he identified, the multiple of enterprise value to EBITDA averaged 9.7 in the companies less than 30% franchised. Those 30% to 60% franchised had an average multiple of 12.2x. Those more than 60% franchised had an average multiple of 15.0x.”
• Notable private equity franchisor purchases from 2013:
– Centre Partners (Uno Restaurant Holdings) acquired Captain D’s in December, 2013
– Sun Capital Partners (Boston Market, Friendly’s, Bar Louie Restaurants) acquired Johnny Rockets in June, 2013.
• Pitegoff’s post closes with a list of private equity acquisitions of franchise systems in 2014:
– Roark Capital acquired Anytime Fitness in March, 2014. Roark also owns Arby’s, Batteries Plus Bulbs, Carl’s Jr., Corner Bakery, Massage Envy, Primrose Schools, Wingstop and Focus Brands, which in turn owns Auntie Anne’s, Carvel, Cinnabon, McAlister’s, Moe’s and Schlotzsky’s.
– The Riverside Company acquired The Dwyer Group (Mr. Rooter, Rainbow International, Aire Serv, Glass Doctor, Mr. Appliance and others) from TZP Group in August ,2014 after previously owning Dwyer from 2003 to 2010. TZP Group acquired Snap Fitness in January, 2014.
– Sentinel Capital (Cottman Transmission Systems, Huddle House Restaurants; Interim Healthcare; Massage Envy) acquired TGI Friday’s in July, 2014 and Checkers and Newk’s Eatery in March, 2014.
– Levine Leichtman Capital Partners (Beef ‘O’ Brady’s, FastSigns International, Lawn Doctor, Senior Helpers, Wetzel’s Pretzels) acquired FASTSIGNS International in July, 2014. Levine Leichtman also owns Global Franchise Group (Great American Cookies, Pretzelmaker, Marble Slab Creamery, MaggieMoo’s) which acquired Hot Dog on a Stick in August, 2014. Levine Leichtman formerly owned Quizno’s.
– Apollo Global Management acquired CEC Entertainment (Chuck E. Cheese) in early 2014.
Read Thomas Pitegoff’s full JDsupra.com post here.
For more insights into franchising growth trends, check out our related posts, Froyo Has Private Equity Smacking Its Lips, Boom Times for the Restaurant Sector? Recruiting Franchise Announces Big Growth Plans, The Top 12 Franchises, Based Upon Average Annual Single-Store Sales, Tested Proven And Growing: The Motley Fool’s Roadhouse To Riches, Growth Investors Likely To Get In Line For Shake Shack IPO, and Fast-Casual Pizza Franchises Have Investors Over The Moon.
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