Private Equity in Franchising: Impact, Trends & 2025 M&A Forecast
A comprehensive overview of how private equity shapes the franchise industry, presented by Alicia Miller, Founder of Emergent Growth Advisors. Alicia Miller emergentgrowthadvisors.com
Hosted by the New England Franchise Association and the Boston FBN.
PE Fundamentals: What It Is
Capital Deployment
PE firms raise funds from institutional investors and acquire businesses.
Growth Objective
Grow businesses and exit with at least a 3x return on capital invested.
Investment Timeline
Traditional PE operates on specific investment and exit timelines.
Why Franchising Attracts PE
Scalable Models
Franchise systems offer replicable business models that can scale quickly across markets.
Predictable Revenue
Royalties and fees create reliable, recurring revenue streams.
Risk Distribution
Franchisees bear capital and operational risk, reducing investor exposure.
Strong Unit Economics
Profitable individual locations translate to attractive overall returns.
PE Investor Types in Franchising
Traditional PE
Funds raised, deployed, and exited on a specific timeline. Focused on medium-term growth.
Independent Sponsors
Raise deal-specific capital for targeted franchise opportunities.
Family Offices
More flexible, longer-term, and typically more risk-tolerant investors.
Hybrids & Direct Institutional
Pension funds and institutions directly investing in franchise systems.
Market Penetration
750
PE-Backed Brands
Approximately 750 franchise brands have PE backing
20%
Market Share
Only about 20% of 4,000+ total active franchise brands
3x
Target Return
Minimum return PE investors seek on their capital
PE Concentration in Franchising

Top Performers
PE-backed brands dominate rankings
Proven Systems
Large, established franchise networks
Strong Unit Performance
Solid economics at location level
Growth Opportunities
Clear domestic and international expansion potential
The Franchise Divide: Haves vs. Have-Nots
PE-Backed Brands
  • Professional teams and capital
  • Advanced technology systems
  • Strong marketing resources
  • Multi-brand platform synergies
Brands Without PE
  • Limited visibility and capital
  • Resource constraints
  • Competitive disadvantages
  • Risk of being left behind
What Attracts PE Investors
Scalable Model
Clear value proposition with proven profitability and growth potential.
Strong Management
Experienced leadership team capable of executing growth plans.
Franchisee Success
Healthy unit economics and high franchisee satisfaction scores.
Growth Runway
Documented white space and expansion opportunities for the brand.
What Repels PE Investors
Poor Validation
Toxic culture, litigation issues, or negative franchisee feedback.
Stalled Growth
Unscalable operations or plateaued expansion.
Weak Leadership
Dysfunctional management teams unable to execute growth strategies.
Execution Risk
Sold but unopened units indicating operational challenges.
The PE Playbook After Investment
Growth Acceleration
Invest in marketing, technology, franchise sales, and new territories.
Operational Optimization
Streamline support systems and improve efficiency.
Franchisee Recruitment
Target stronger operators, often multi-unit franchisees.
Talent Acquisition
Hire PE-experienced executives to drive growth initiatives.
Risks to Watch Post-PE Investment
Fee Increases
Franchisors may raise fees to boost revenue and valuation.
Short-Term Focus
Decisions that benefit PE at franchisee expense.
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Culture Misalignment
Disconnect between operators and PE owners.
Support Changes
Streamlining may reduce franchisee assistance.
Current M&A Climate (2024)

High Interest Rates
Debt remains expensive for acquisitions.
Extended Hold Periods
Average now 7 years vs. 4-5 pre-pandemic.
Valuation Challenges
Assets bought at peak face exit difficulties.
2025 M&A Forecast
Increased Scrutiny
Deals face tighter evaluation criteria.
Premium for Top Assets
Only elite brands will command high multiples.
Operational Focus
Value creation through execution, not financial engineering.
More Deals Expected
Transaction volume likely to increase.
Preparing for PE or Exit
Financial Hygiene
Clear P&Ls, unit performance data, and accurate FDDs.
Operational Proof
Track cohorts, franchisee profitability, and growth metrics.
Franchisee Expansion
Demonstrate franchisees reinvesting in your brand.
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Management Readiness
Build a PE-ready team that can be upgraded.
Valuation Misconceptions
Headline Multiples
Often misleading without understanding deal structure details.
Adjusted EBITDA
Frequently inflated through aggressive add-backs and adjustments.
Deal Structure Reality
Earn-outs and seller notes can significantly alter actual value received.
Hype vs. Value
Industry buzz rarely reflects true transaction economics.
Why Deals Fail
Difficult Turnarounds
Franchising requires franchisee buy-in. Rushed changes often backfire.
Unforced Errors
Overleveraging and short-term decisions damage long-term value.
Franchisee Unrest
Growth requires franchisee trust. Without it, PE strategies stall.
Using the PE Lens Strategically
Identify Operational Gaps
Evaluate your business through an investor's critical eye.
Benchmark Against Competitors
Compare your metrics to industry leaders and PE-backed brands.
Spot Inflection Points
Identify where capital or talent investments would accelerate growth.
Improve Unit Performance
Focus on franchisee success metrics that drive valuation.
Final Advice from Alicia Miller
Build a brand ready for capital. Avoid letting ego or hype cloud your vision. Focus on franchisee success. Keep your business in "sale-ready shape" daily.
Professional Background
Founder and Managing Director of Emergent Growth Advisors, a boutique strategic advisory firm at the intersection of franchising and private equity.
Former multi-unit franchisee bringing operational experience to every engagement.
Thought Leadership
Monthly columnist for Franchise Times with over 70 published articles on franchising and private equity.
Published in Entrepreneur and Forbes. Advisor to the International Franchise Association's certification program.
Education & Certifications
MBA from The Wharton School, MS from University of Maryland, BA from Smith College.
Certified Merger & Acquisition Advisor, Certified Franchise Executive, and Directorship Certified by NACD.