Non-Restaurant Franchising



In the last few years, industry insiders and private equity funds have been emphasizing that the future growth in franchising is outside of restaurants. They contend that restaurant competition is just too much – there is a new concept on every street corner, and organic industry growth is almost non-existent. In non-restaurant franchising, however, there appears to be several pockets of tremendous growth potential.

Hey, this is Rick Ormsby at Unbridled Capital. I'd like to spend a little bit of time today to talk about non-restaurant franchising. Non-restaurant franchising is taking some growth characteristics in the marketplace, and we're hearing a lot of investors ask and inquire about non-restaurant franchises as new opportunities and platforms for growth. Everything from the one and two unit franchisee who could be interested in putting a fitness franchise in their hometown and operating it to large investors who might be interested, for example, in owning 20 or 30 or 50 Planet Fitness franchises because of the way they've been able to grow, the story they've told, and the EBITDA margins that those businesses have been able to generate.

I talked to private equity companies all the time, and several of them have told me recently that they're moving away from the restaurant franchising model because restaurant franchising, while it's been a stable source of business for many, many years, the restaurant model doesn't have much new demands. So you have a lot of cannibalization and a lot of competition for new concepts. And so in some of these non-restaurant franchises where the model has worked for years, the franchising model, but the particular segment or business has not been fully exploited. Many investors, family, offices, and individuals are seeing that as an area to explore for potential growth of investment.

I have a very good friend whose private equity company has recently bought a tax franchise and plans to franchise it across the country. And they think it has quite a big growth characteristic and curve to it. We also know that Roark Capital recently bought Massage Envy and plans to grow that brand, and it's been successful. And you do hear of quite a few new concepts outside of the restaurant space that are growing their franchise base quite quickly. We think this has potential for future growth for investors, operators, buyers, and sellers alike. And it's one of our goals to continue to drive relationships, knowledge, and the marketplace in non-restaurant franchising as a platform within Unbridled Capital. And if you have any questions about that, we'd be honored to talk about it with you at any time.