💰Why franchising is the new gold rush

Private equity falls in love with franchising

Author

Chris Wright
January 09, 2025

Welcome to Franzy Five, the 5-minute weekly summary of franchise news 👋.

At Franzy, we match aspiring owners with their ideal franchises through personalized recommendations and transparent metrics. Think match-making, but for your business future. Our platform shows you opportunities you'll actually care about, complete with the numbers that matter.

💰 Private Equity's Big Bet

Key Highlights:

  • Both franchisors and franchisees are becoming PE targets, creating a new dynamic where even local operators can access institutional backing and expertise.

  • PE giants are doubling down on franchise investments - from Blackstone's $8 billion Jersey Mike's deal to smaller investments like 7 Brew Coffee and $2 billion Tropical Smoothie Cafe.

  • PE firms are drawn to franchising's winning formula: predictable revenue streams through royalties, risk spread across franchisees, and scalability without massive capital needs.

  • Following Buffett's Dairy Queen success blueprint, franchising has evolved from small business model to institutional darling, with multi-unit operators now dominating 54% of franchise units.

👉️ Why It Matters:

Private equity's increasing interest in franchising at various levels - from major chains to individual franchisee groups - shows the model's strength beyond just mega-deals. The trend demonstrates that well-run franchise operations of any size can attract serious investment. This shift is creating new opportunities for growth across the franchise ecosystem.

🐔 Wingstop UK’s Cinderella Story

Key Highlights:

  • Three regular guys with zero F&B experience talked their way into running Wingstop UK, then scaled the franchise to 57 locations and 2,500 staff in just five years.

  • Private equity firm Sixth Street bought them out for £400M, but they're keeping a piece of the action while plotting a massive expansion to 200 stores.

  • They won big by going all-in on youth culture - partnering with rappers, crushing it on TikTok, and teaming up with trendy brands like JD Sports.

  • The deal sparked a bidding war with Domino's trying to get in on the action, showing just how hot the UK chicken market has become.

👉️ Why It Matters:

This deal flips the franchise playbook on its head - proving you don't need industry experience to build a monster business. Their success shows that understanding your customer's culture can matter more than knowing how to run a kitchen. Private equity's massive bet on their approach signals a shift in what big money looks for in food franchises.

Key Highlights:

  • Massage Heights' transformation into Heights Wellness Retreat shows how a company can strategically rebrand itself by expanding services and reaching new markets.

  • Successful rebranding requires strong franchisee buy-in through clear communication, proper training, and support tools - making frontline representatives true partners in the transformation.

  • Modern consumers, especially younger demographics, seek brands that align with their values and lifestyle goals, making holistic brand evolution crucial for staying competitive.

👉️ Why It Matters:

Rebranding isn't just a new logo; it's about keeping up in today's market where people want more than just services. Smart franchise evolution means carefully balancing core strengths with new opportunities while bringing your entire network along for the journey. This approach keeps franchises competitive and true to their brand.

Key Highlights:

  • Success in franchising demands more than capital - it requires full commitment across operational, financial, mental, and emotional aspects of the business, according to First Financial CEO Cindy Watson.

  • Data from SBA and banks confirms franchises have higher success rates than independent businesses, but only when owners fully embrace the system's proven path to success.

  • Red flags for potential franchise failure include focusing solely on profits, lacking management skills, and showing poor engagement during the exploration process.

👉️ Why It Matters:

Franchise success hinges on the combination of proper capitalization and complete personal commitment to the business. Understanding this dual requirement helps potential franchisees evaluate if they're truly ready for ownership. Smart preparation in both financial and mindset aspects separates thriving franchise owners from those who struggle.

🏆 FBR’s Top 200 Franchises for 2025

Key Highlights:

  • Based on insights from 34,000 franchisees across 350 brands, the list reveals which franchises excel in culture, training, financial performance, and work-life balance.

  • Nearly half of franchisees report gross sales exceeding $1M annually, with a quarter surpassing $2M.

  • 85% of franchisees say they enjoy owning their businesses, and over half are considering expansion.

👉️ Why It Matters:

FBR’s Top 200 Franchises for 2025 is built on real feedback from franchise owners. It highlights brands that keep franchisees happy and offer strong growth potential.

✂️ Snippets

Former TGI Fridays CEO Ray Blanchette returns to lead the chain, aiming to revitalize operations amid changing market dynamics. His comeback signals potential strategic shifts for the brand. (Source: WSJ.com)

McDonald’s largest franchisee has renewed its agreement for two more decades, ensuring continued growth and operational stability. This renewal reflects strong franchise relationships and long-term confidence in the brand. (Source: NRN.com)

Greater Manchester's mayor says bringing buses back under public control after 40 years is a tremendous success, showing a new way to use franchising. (Source: Transport-network.com)

Franchises integrating AI will gain a competitive edge, streamlining operations, cutting costs, and improving customer personalization. Those that adapt early are likely to lead in a fast-evolving market. (Source: BizInsider)