PARTNERING WITH A PRIVATE INVESTMENT GROUP: Learn what investors look for and key ways to make your brand stand out.

Author:Herrmann, Erik

When it comes to franchise investment opportunities, private equity funds offer a unique opportunity to spur growth and development that shouldn't be ignored. Should private equity choose to invest in an emerging brand, the potential for scaling and even segment dominance is high. Or say an investment group opts instead to fund a more established brand. That support can equip the brand to move to the next stage of expansion and operational enhancement.

Put simply, the restaurant industry at large, and franchise concepts in particular, provide investors the possibility of driving value to a degree that many other investment opportunities cannot. The way for franchisors to gain investors' attention, however, is to make sure they put their best foot forward. By knowing which metrics investment companies are focused on, franchisors can take care to anticipate scrutiny and position themselves for success.

Here are the top three factors that franchisors should be sure to optimize if they want to not only make it to the starting line, but all the way to signing on the dotted line.

  1. A truly differentiated concept.

    In 2019, the competitive nature of the restaurant industry is more evident than ever. Demand hasn't necessarily kept pace with the number of seats in the industry at large. There's a surplus of brands all clamoring for market share, meaning that the motto of the American restaurant industry these days could feasibly be summed up as: "Differentiate or disappear."

    To capture an investor's attention, franchise brands must first demonstrate their understanding of the fundamental need to differentiate. Showcase that you started with a consumer's need and identified an opportunity set in the market by finding the right combination of price/value, convenience/hospitality and dining occasion. And remember that, just because your concept might have strong bones and successfully differentiated at the onset doesn't mean you can't, or shouldn't, learn. Investors want to see that brands know how to "read the consumer" and adapt to significant marketplace changes without losing their brand integrity.

    Restaurant franchises can certainly evolve over time, but the ones that do it right have a differentiated foundation to begin with and evolve in ways that leverage versus distort their core identity. Ultimately, franchisors looking for capital infusion need to demonstrate that they are unique enough in their space that they minimize competitors' reach and...

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