Private Equity's Playbook: Hey, franchisors: Commit to explosive growth

Franchisors! If you’re not thinking like a private equity (PE) firm, you’re leaving money on the table. Seriously. PE guys have cracked the code on identifying untapped potential. Let’s use their playbook to skyrocket your franchise’s value.

Private equity firms aren’t just looking at your balance sheet. They’re searching for hidden gems, opportunities for explosive growth. It’s time to take a hard look at your franchise.

Optimize unit economics

Let’s talk unit economics, the bread and butter of scalable growth, folks. Start by identifying your rock-star franchisees. What makes them tick? Figure it out and spread that magic across your network. Then, focus on boosting average unit volumes. Maybe it’s time to shake up your menu or get creative with pricing. And trim the fat without sacrificing quality. Your customers shouldn’t notice. Got underperforming units? Don’t sweep them under the rug. Show investors you’ve got a solid plan to turn them around. That gets PE firms excited.

New unit growth

PE firms are all about that hockey stick growth curve. To show them you’re ready to hit the ice, start by speeding up your franchise sales process. Time is money, people! Get scientific about site selection: Use data to pick winners. While you’re at it, build a killer pipeline of franchisees. Pro tip: Look at your rock-star managers. They could be your next franchise owners. Think big with area development deals or master franchising. In PE world, go big or go home.

Diversify revenue streams

One-trick ponies don’t cut it. PE is looking for a business with multiple, growing income sources. Are you too dependent on franchise fees? Get creative. Could you develop your own products? Set up a supply chain business? Ever thought about vertical integration? It’s about controlling more of your business. Give it a shot. If you’re not killing it online, you’re missing out. Digital is where it’s at, folks. Don’t get left behind in the brick-and-mortar Stone Age.

Brand mojo

Your brand is your secret sauce. Make it so irresistible that customers—and investors—can’t get enough. Start with a brand audit, and don’t sugarcoat it. What’s your story? If it doesn’t give you goosebumps, it’s back to the drawing board. Once you’ve nailed that, pour fuel on your marketing fire. Make sure it’s actually moving the needle, not just making pretty pictures. Don’t be a lone wolf: Strategic partnerships can take you places you never dreamed of. Think big, think bold, and watch your brand soar.

Scalable infrastructure

PE firms want to see a business that can grow without the overhead exploding. Tech it up, baby! You need robust franchise management software. It’ll help you juggle operations, sales, and royalties while keeping everyone in the loop. 

Soup up your POS systems and your tech stack, dive into data analytics, and get your head in the cloud (computing, that is). Standardize everything: from how you onboard franchisees to how you flip burgers. Use software to keep everyone on the same page.

Build a team that knows how to scale. Make sure they can navigate your tech stack like pros. Embrace your inner data nerd. Use fancy reports from your software to make smart decisions. And always keep your tech fresh. When PE firms see your tech-savvy, streamlined operation, they’ll fall over themselves to throw money at you.

Polish up paperwork

Legal docs are about as exciting as watching paint dry. But hear me out: Your franchise agreement could be holding you back. Ditch overly restrictive clauses. Make your FDD sing, especially Item 19, your chance to show off juicy financials. Consider a tiered royalty structure. Reward highfliers and motivate the rest. It’s amazing how much value can be unlocked by tweaking the fine print.

Global domination

Want to really get PE firms excited? Show them you can take over the world. Figure out which international markets are ripe. Have a solid game plan for going global. Who will be your trusted allies? Reach out to IFA suppliers to help with strategy, supply chain, and more. Don’t shy away from the tough stuff. How will you handle supply chain issues or menu tweaks for local tastes? Consider dipping your toe into international waters with a pilot or two. Nothing speaks louder than results, especially when they come with a passport.

Innovation engine

Show them you’re not resting on your laurels. Create a system for capturing great ideas from your team and franchisees. You never know where the next big thing will come from. Always test new products, new services, and new ways of doing things. Keep your finger on the pulse of emerging tech. Be the disruptor, not the disrupted. Hey, consider setting up an innovation lab. It’s like R&D but cooler. Show PE firms you’re blazing a trail into tomorrow.

Wrapping it up

It’s time to put these principles into action. You’re building a lean, mean, growth machine. Take a good, hard look at your franchise. Where are you crushing it? What could use some work? Then get to it. Trust me, when you see revenue and profit numbers climb, you’ll be glad you did.

Make these principles part of your DNA. Keep pushing, keep improving, keep growing. Before you know it, you’ll have PE firms knocking down your door—checkbooks in hand.

Why wait? Show the world what your franchise can do!

Keith Gerson, CFE, is president & CEO of Gerson Advisory Services.