Thinking about franchising your business? CHECK THIS OUT!!
Worried about PE coming in and taking over your franchise? CHECK THIS OUT!!
Private Equity = Franchising Gold #TheDalyCoach #KimDaly.tv
Today I welcome my great friend Kevin Wilson to the franchising conversation. Kevin is the CEO of Buzz Franchise Brands, and he’s here to speak about building a franchise brand and selling to private equity.
In my experience, there are a lot of misconceptions about what “private equity” may mean to a franchise business, and I’d like to use this opportunity to not only dispel some of those myths, but to inspire those of you who are entrepreneurs who have the dream to build your own franchise brand and bring it into private equity.
Kevin shares about his background and what led him into private equity:
“My background is a little a little different than maybe most you might see in franchising. I started my career at a large management consulting firm working for big companies but always was very entrepreneurial. I left the firm, started my first franchise called Bennie’s Bagels. Selling bagels to Texans back in the mid-nineties was quite a challenge! We grew that business to thirty locations. I went back into big business, mostly in the aviation industry down in South Africa. And then I spent several years in private equity myself and, in many cases, making investments in franchising companies before breaking out on my own. About ten years ago, we bought a small company called Mosquito Joe, you’ve had a couple—a couple of trucks, a few hundred customers. And then we turned that business from—we rebranded it, raised money, hired a team, and then grew that through franchising to about 350 locations in 34 states.”
Kevin describes the experience that introduced him to the idea of selling his franchise to private equity:
“We raised money from outside investors, but it was always individual money. It was never institutional money. So, it allowed us a little bit more flexibility. Certainly, we didn’t feel like we ever had a gun to our head to get some sort of exit at any one time. But having said that, when an entrepreneur takes money from investors, there’s this obligation to, as a good fiduciary, to grow that business, grow that investment and ultimately give them a return on their money. We had to evaluate a lot of options. I didn’t want to saddle the company with debt. Another option was to sell all of those franchise brands. I knew every franchisee personally, and I wanted to make sure that wherever—wherever they landed, wherever we sold to, they were going to be in a good spot, and so, we ran the process, and we ended up finding a good home for them with Neighborly, which is backed by private equity called Harvest Partners.”
One of the misconceptions about private equity is that it always results in massive changes in the organization and culture. Kevin shares some insight:
“I think it really comes down to the firm. At the end of the day, the franchisees have their franchise agreement that they’ve signed, and they have all those obligations have to be honored by the acquirer. But the most important thing is to make sure that they’re with a group that understands franchising and understands the support that’s needed for franchisees.
I actually believe that most franchisees create a culture in their company for themselves. They have employees. They have they have customers. I think that’s the most important thing for the success of their business. We have a unique culture at Buzz Franchise Brands. It’s very different than Neighborly’s culture. Their culture works well for them. Our culture works well for us. I think the management team of Mosquito Joe is the one probably more impacted by culture differences than, say, the franchisees are when they when an acquisition goes through.”
Kevin shares advice to entrepreneurs considering bringing their franchise into private equity:
“You can never go wrong when you focus on the people. And I think if you focus on your people, you take care of your people, you develop a good strategy for the business, hit your targets, grow it. You’re going to have a lot of options out there.
There’s just so much money out there in these private equity funds. They’ve got to deploy it. They’re willing to pay up, pay some multiples that are higher than maybe they have historically because they’ve got to put the capital to work over a short period of time. And that doesn’t seem to be abating. I’ve seen a lot of money out there.”
If you’re a franchisee, or an entrepreneur interested in investing in a franchise, you may have been warned about selling to private equity. I’d encourage you to do your research, because in some circumstances, private equity is the perfect option.
If you have questions about franchising, private equity, or if you’d like a personal introduction to Kevin Wilson, I’d be happy to help. Please subscribe to the Daly Coach channel for more great content, leave a question or comment below, and send me an e-mail right now to start a conversation.