Grow the Thoughtful Way

Check all the boxes for methodical franchise acquisition

One of the trends of the past few years has been growth through acquisition. Discerning the right acquisition targets is a pivotal step for PE groups, platform companies, and multi-unit franchisees eyeing expansion and diversification. This is especially true if you’re seeking to extend your reach beyond your traditional markets. The challenge is in identifying opportunities that align with your strategic goals and have enduring viability and consumer appeal.

The best practice for uncovering choice acquisition targets is to develop a set of parameters that define your preferred opportunity. For some companies, the acquisition target is a $2–3 million business. For others, the threshold is higher and could range from $10–25 million. Once the parameters for a business acquisition target are clear, you need to gather the information that will help you identify brands or franchisees that meet your criteria.

Size and sustainability

Selecting the right franchise opportunity for acquisition involves a keen eye for both the size and sustainability of a potential business. If you’re looking for a brand with consumer appeal across diverse regions, target franchisors or franchisees that have substantial market presence and sales. These brands typically demonstrate market resilience and growth potential, making them attractive targets for expansion-oriented companies. 

Choosing these well-established franchise brands mitigates risk and opens avenues for significant returns. Size is directly linked to brand visibility and market presence, which are crucial for long-term success in the competitive world of franchising.

Analyzing franchise brands

The first step is to create an extensive information set on franchise brands, focusing on factors such as market presence and a track record of success. This information is best prepared by industry experts and should include comprehensive brand information, financial health, and growth patterns. This data is essential for evaluating potential franchise systems and making informed decisions.

High-performing franchisees

After understanding the brand, the next step is to delve into the franchisees within these systems. Identifying high-performing franchisees is crucial for businesses planning to acquire and enhance existing franchises. This method targets franchisees that demonstrate profitability and show potential for further growth and expansion.

Emerging opportunities

Beyond focusing on current market leaders, it’s important to identify emerging franchise brands that show potential for significant growth. This forward-looking approach ensures preparedness to tap into new and promising opportunities in the franchise market.

Research and data

The backbone of this acquisition strategy is in-depth research and data analysis. The information compiled offers insights into franchise brands and detailed profiles of franchisees, covering their financial performance and market penetration. This level of detail is crucial for making strategic decisions that align with long-term business goals.

Additionally, access to detailed owner information, including their business scope and contact details, aids in developing a deeper understanding of potential targets. This granular approach is key for identifying and effectively engaging with potential acquisition prospects.

Final thoughts

For companies aiming to expand their franchise portfolios, a methodical and data-driven approach is key. The process of identifying the right acquisition targets involves evaluating established franchise brands and their franchisees as well as keeping an eye on potential up-and-coming franchises. It’s critical to partner with firms that specialize in franchise analysis and are equipped with the necessary tools and databases.

By investigating well-established brands, high-performing franchisees, and emerging opportunities, companies can make strategic decisions that foster growth and diversification. In the ever-evolving franchising industry, such a thoughtful and informed approach is essential for sustained success.

Paul Wilbur is COO of FRANdata where he is instrumental in building the company’s research and consulting framework. He manages the research, information management, marketing, and IT departments and plays an integral role in the strategic development of FRANdata’s suite of franchise solutions. Contact him at 703-740-4700.