Franchising continues to be a leading job creator in the United States. According to the International Trade Administration, “For the past five years, the average annual job growth in the franchise sector was 2.6 percent, nearly 2 percent higher than all businesses economy-wide.” With many restaurant and service companies in the industry embracing an asset-light model, franchising will continue to be a successful strategy for growth. “The franchise sector will contribute approximately 3 percent of U.S. GDP in nominal dollars.”
More investors and/or newly formed equity groups are purchasing established franchisees, moving the landscape away from the single/family owned franchisees. These investors are taking positions as equity owners of franchise systems to enhance their portfolios and expand their ROI’s. With many mature franchisees looking to sell and with no interested family member to pass the business onto, these more sophisticated investors continue to acquire in the same brand, building large companies in the process. Adding to the changing landscape, private equity groups are also looking at investing in franchisees of smaller, lesser-known brands that fit their economic criteria. This trend isn’t only in restaurants; we are also seeing it in retail service companies.
With this infusion of new capital will come the ability to increase the brand’s operations and quality of product and services, which will enhance performance overall for both the franchisor and franchisee. With this evolving franchise landscape, The Elliot Group has been instrumental in identifying key talent and strong leaders who can build and run these newly created private equity backed organizations, which leads to the continued growth and expansion of these groups.