The Right Partners Help Franchises Thrive: Carefully selecting your backers can supercharge growth.

Author:Dwyer-Owens, Dina

With low interest rates and a sea of capital driving up prices for attractive businesses, it's a tempting time to sell any business. Successful franchisors are particularly sought after by strategic and financial buyers--we all know the many positive attributes of a good franchise model!

So now is a wonderful opportunity to bring on a partner to boost the growth of your franchising company, whether it's through selling a minority or majority stake. And as anyone selling anything, you'll want to maximize value. Here's a quick look at trends in private equity franchising investments, and what to seek in a partner.


One trend is simply that there is more private equity activity. As more private equity firms learn about the benefits of the business models in franchising, they are investing in both franchisors and franchisees.

Another trend is flexibility, with both control and non-control options available. Private equity has developed considerably in the last decade and sellers can often both obtain liquidity and/or growth capital while also maintaining control of the business. Just be sure you fully understand your rights and controls as explained in formal investment documents (use great advisors in any sale process!).

Today, private equity firms are buying both franchisors and franchisees. Some firms are attracted to the growth and scalability of the franchisor model while others see franchisees as a good value. They like the ability to underwrite franchisees with consistent performance over a long period of time, enhanced by the leverage available to multi-unit franchisees.


It's a seller's market and more private equity firms are offering more options to franchisors. If you're ready to explore partnerships, take your time to find the one that works for you and your company. You built a successful business and want to find a buyer who will take care of the company, its customers and its employees. Here are some things to consider:

* Values and culture are vital. Find a partner you can trust and one with whom you'll be comfortable working.

* Understand the partners' experience in franchising.

* Ensure that the partner has an effective network of business contacts and consultants that can deliver immediate value.

* Check references! Just as you would vet a potential franchisee, vet all potential investors. Call the management teams of the companies they formerly invested in to get the scoop. Drill down and get...

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