How Private Equity is Boosting Franchises

In 2020, countless industries and business models slowed down or locked down, trying to find a new normal in an abnormal world.?

Franchisors, franchisees, and their employees often struggle through tough times. Yet, the resilience of franchising shines through during recovery periods, bringing franchising back into business faster than expected.

I can report that what we’ve seen recently can only be characterized as a boom. A big, energetic, forward-moving, money-making business boom that is breaking records left and right. Just what factors are fueling this growth? Let’s take a look at a few of the most important:

The Five Key Drivers of Franchising's Success

1. People are Stepping off the Sidelines

After a period of learning what it feels like to sit things out, people are ready to take action - to resume travel, eat out again, and see concerts.

But a deeper trend is emerging among those eager to take more ownership of their career plans. Many people who considered becoming entrepreneurs in the past are bringing new energy to franchises.

2. Big Investors are Paying Attention

Franchising has long promised stability and profitability, but recent years have seen a massive inflow of money from private equity, where groups buy entire systems and invest in their growth.

What happens when private equity gets involved? Growth accelerates. These groups heavily invest in digital marketing, management resources, tech support, and call centers, benefiting unit owners. They also bring expertise and energy to franchises, aiming for long-term sales, which can mean profits for unit investors.

3. Tried-and-True Keys to Profitability are in Play

Companies whose business models shone during hard times are stepping up to show they’re not just survivors—they’re thrivers. These businesses relied on great leadership, outstanding use of technology, the ability to pivot, and the strength of their network of franchisees to maintain profitability.

Resilient, recession-resistant businesses include business-to-business services, necessary home services, recurring revenue models, and tech-driven companies.

With franchises reaching over $860 billion in output, it’s clear this is not a small pocket of franchised businesses. It’s a wide swath of well-run concepts benefiting franchisors, franchisees, and customers.

4. An All-In-This-Together Mentality

Teams stepping up to support each other in troubled times is a trend I’ve seen play out many times. Franchisors have been addressing potential problems for franchisees with their full corporate strength, rather than leaving individual units to find their way.

Examples include in-house recruiting systems, minimizing supply chain impacts, and acquiring supporting companies to ensure smooth operations.

5. New Concepts and Hot Topics Abound

Franchisors continue to display creativity and ingenuity with a wealth of new concepts across industries.

• Medispas: Services like cryotherapy, light therapy, infrared treatments, microneedling, and IV therapy are becoming more accessible.
• Mental health services: The unmet need for mental health services in the US has led to the rise of excellent franchised concepts.
• Fitness: Technology-heavy concepts, time-saving workouts, and old-school-made new concepts (like boxing) continue to grow.
• Home services: Demand for reliable home services, from roofing to renovations, is sky-high.
• Caring companies: Businesses that help families care for aging parents, kids, and pets are thriving and expanding.

A Thriving Future for Franchising ?

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