Invest in an innovative franchise system!
In order to grow, promising young franchise systems often require outside investors to get to the next level. The size of the investment ranges, depending on the needs of the franchise. Service-type franchise brands tend to require less in terms of development costs; whereas, a full-service restaurant concept will require more of an investment.
Meanwhile, as the franchise system you’ve invested in grows, the entire industry advances. Private equity firms are always out in the marketplace looking for concepts to place under their umbrella. For example, Roark Capital has about twenty franchise brands in their portfolio, including the well-known Auntie Anne’s, Cinnabon and Arby’s. Their total portfolio generates more than $4.5 billion in system sales yearly. Continually looking for ways to diversify or add more revenue to their bottom line, private equity firms, like Roark, are actively searching for attractive, mid-sized franchise systems to purchase.
As you think about whether investing is right for you, consider this simple example. Imagine that you offer $400k with a 45% stake in a franchise system to boost their development and enhance operations. After the third year, with fifty units each contributing $5k a month in royalty, the system generates $3 million in annual royalties. One day you get a knock on the door from a firm offering $15 million for the franchise system. Any way you do the math, that’s a favorable return on investment!