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Identify the perfect franchise for you! Take our short quiz Take our free franchise quiz!

Should Franchisors Consider Private Equity Investments?

Private equity investors have grown comfortable with the predictable cash flow and exciting growth opportunities in franchising. Today many franchise companies exploring financing alternatives are looking to private equity firms for growth capital, cash for buy-out’s, or liquidity for shareholders and management. Forming an equity partner relationship can have a dramatic impact on the long-term potential of a business.

How can you be sure it’s the right choice for you? We asked Glen Kaufman, Managing Director at American Securities, a private equity firm with a consistent track record in the industry. The middle-market firm invests in companies with revenues ranging from $100 million to $1 billion.

Q: What should you expect from the franchise/private equity investor relationship? 

Kaufman: You ought to expect a partner who understands your company and its culture, is supportive of the management team and its position, understands how to deliver value without infringing on management’s role, and is oriented towards the long-term successful building of your enterprise. The capital that a firm will bring is necessary, but what you really ought to be focused on are those other elements.

Q: How can you find the right equity partner?

Kaufman: There is no shortage of equity partners. You can seek equity capital directly through your relationships with law firms and accounting firms who will generally know the sources of equity capital. You can also retain an intermediary, a broker, or an investment banking firm that will connect you with potential providers of capital. Your job during the process is to effectively communicate your story and your vision in a candid way so that you ultimately get the right match.

Q: What can you do to make it succeed? 

Kaufman: The key to success as in all relationships is picking the right partner that matches your style, culture, and goals. Then nurture the relationship from the earliest stages. Avoid doing negative things like portraying yourself differently than you are, over-promising, or developing an attitude that does not promote constructive dialog such as blocking the other party from the discussion.

Q: When is the right time to begin the process?

Kaufman: People want capital for many reasons. Whatever your reason, the right time to raise capital is before you need it. You never want to be in a situation where you need to do anything in business. You want to act to raise capital when you feel no pressure to have that capital.

Contact info: Glenn Kaufman, Managing Director American Securities (212) 476-8029 www.american-securities.com

Franchisor-Franchisee Independence and Joint Liability, Redux

In the Tilted Kilt case, the franchisor allegedly published an “employee handbook” for franchisees to distribute to their staff, and exerted significant control over the operation of the franchised outlet in question. If true, these are two factors that typically weigh in favor of finding the franchisor to be a “joint employer” with its franchisee, thereby potentially subjecting it to liability for the alleged harassment.

How to Fund Your Franchise Acquisition

Even if you have all of the required start-up capital sitting in your bank account, and even if you have mentally prepared to invest a considerable sum into a franchise, you may be wary of risking your very bottom dollar for the new venture. There are alternatives, including raising debt or equity funding, but both of these options come with a set of benefits and drawbacks that you'll need to weigh carefully before committing to any particular path.

We'll Leave the Light On For You: Motel 6's Advertising Success

When Motel 6 conceived of the idea for a campaign in the mid-1980s, Bodett worked on NPR’s All Things Considered program. The Richards Group, a Dallas- based advertising agency, was hired by Motel 6 in 1985 and thought Bodett would be an excellent spokesman for the chain because of his warm and friendly vocal style. Hired in 1986, Bodett ad-libbed the line, “We’ll leave the light on for you”while in the recording studio for the first time and the slogan was both an instant and lasting success, staying with the chain for over 25 years and counting.