This is a review of why young franchisors fail to grow sufficiently to attract private equity interest.
Barr’s thesis is simple.
- Franchisors have to grow to 100 units before they have a predictable and bond like net revenue. Before that their revenue is simply not consistent enough to attract private equity.
- But franchisors don’t realize how much money they have to invest in both people and technology, paying it forward, to get to the 100 unit level. And since. most franchisor are undercapitalized they don’t do this.