Changing Landscape of M&A



I've always loved change because it brings opportunities for innovation, collaboration, and growth, and the franchise business has seen transformational change in it's storyline. As a generational shift continues to accelerate, let me take you down memory lane of where we've been.

Many decades ago, franchising became a wonder child in the business world. It grew at an astronomical pace and offered a revolutionary entrepreneurship model to an entire generation of people who wanted their slice of the American dream. Historically speaking, the advent of franchising is one of the best and least told business success stories throughout our country's illustrious history.

Franchising began largely as a mom and pop enterprise. In the 1980s, we started to see the first signs of generational shift as retiring franchisees sold their businesses to other nearby small operators. This began a slow trickle of initial consolidation that resulted in many midsize franchisees throughout the next 15 to 20 years. These mid-size franchisees became the backbone of the industries, and they were very important part of the storyline that we see today.

When I first got in to restaurant franchising as a young corporate employee in the early 2000s, there were only a few large financially backed franchisees in the business like NPC and [KMAC 00:01:26]. To my knowledge, there were certainly fewer than 10 investor led franchisees across KFC, Taco Bell, and Pizza Hut for example.

The mid 2000s had some years of strong industry performance and easy credit and financial investors slowly and quietly started entering the franchise system. When the great recession hit, banks and franchisors forced consolidation, loan defaults, royalties in the rears. Defaults on development obligations, and bankruptcies changed the ownership of franchise organizations. Both lenders and franchisors realized that larger and well capitalized franchisees were a better way to protect their investments.

The turnaround started in 2012 and by 2014 to 2015, the first wave of family office buyers started to look at franchising as a diversification and growth vehicle for their investments. Several young Northeast MBAs with deep family office pockets entered the business as consolidators. Their initial acquisitions were a huge success and their return sparked a tsunami of others like them.

By 2017 and seemingly all of a sudden, the family office craze was in full force in the franchise industry. Private equity firms started losing favor as franchisee investors because family offices don't have a mandated buy and sell time period that franchisors disliked so much. Franchisors shifted to acquiring entire brands with greater regularity, often going down cycle to newer brands with better growth prospects.

As we push into 2020, the maturity of the long MNA expansion cycle has resulted in a record number of financial investors in franchising and a more crowded space has forced many of these investors to consider smaller franchise investments than they previously considered. Often as low as one to $2 million in EBITDA for example.

Mix this in with an aging franchise base, a difficult operating environment, fewer children who want to operate their parents' businesses, and record prices in the sale of many franchise companies, and it's not a surprise that franchise ownership has evolved and consolidated so quickly in recent years.

Now, what does this mean for you and how do you fit into the future narrative of franchising? Please feel free to reach out to Unbridled Capital anytime to learn about your strategy for the future. We're very proud of our industry disrupting two year success rate of closing almost 93% of our engagements. Also, feel free to check out our website at for more videos, podcasts, white papers, and a list of our transactions.