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

Franchise Help Interviews Concierge Home Services

Including administrative tasks, I would say 35 hours a week.

Franchising Meetings & Conventions - More than a Great Party

Planning and staging a dynamic franchise convention that motivates franchise owners requires expert planning, flawless execution and the support of your entire franchise organization. We talked to experts in the industry to get some meeting planning tips that will result in top-notch franchise conventions.

Know Before you Go – Non-Compete Provisions in Franchise Agreements

In general, non-compete provisions state that the franchisee will not, during the term of the franchise agreement and for a reasonable period thereafter (typically two or three years), own or be involved in any “competitive business.” What constitutes a “competitive business” will vary from franchise system to franchise system, but most franchisees can generally expect to be prohibited from taking part in any business that offers goods/services that are either identical to or competitive with the goods/services offered under the franchise system. Non-compete provisions must be limited in geographic scope, and generally cover a set radius (usually somewhere around 5 to 25 miles) around the former franchised outlet, and possibly also the outlets of other existing franchisees.