This article has been updated as of 18/11/21, to include a further acquisition
While the global pandemic depressed business activity almost universally, it had the predictable effect of creating an environment in which more companies were being acquired. This was the case in the franchising industry too, with some massive deals signed in 2021.
A perfect storm of low interest rates, introduced to aid flagging economies, and rising stock prices has led to this increase in M&A. It’s not just franchisors and franchise groups buying up brands; private equity firms are very much a part of the franchising scene, and a year of general inactivity has left many with lots of liquid cash.
“Private equity firms have nearly $2tr in dry powder and there is a similar amount of cash on the balance sheets of the S&P 500. Combine the financial means to do deals with the need to readjust business models to the post-pandemic world, and you’ll find organizations increasingly interested in their M&A options,” said Jeff Black, partner at Mercer, speaking to Reuters.
In 2020, private equity firms realized the volatile nature of the market didn’t lend itself to investment in risky concepts. As a result, many opted for smaller deals and more stable acquisitions. Franchises are businesses with stable incomes and outgoings when operating as normal, which makes them ideal for private equity firms that don’t want to sit on cash reserves. Private equity has been dining out in the wider business world too, cannibalizing companies that have suffered and underperformed during the pandemic.
Franchisor groups have not let up with acquiring brands that fit their portfolio, and cash-rich groups saw this year as a chance to add proven and profitable concepts to their family of brands.
Read on to see six of the biggest acquisitions from the franchising industry in 2021.
KKR acquires Neighborly
Kohlberg Kravis Roberts (KKR) Co. is one of the world’s largest investment companies, and has a portfolio worth around $545bn.
Neighborly is a group of home service brands that started as a single brand in Waco, Texas in 1981. The group now has 29 brands to its name, with 4,800 franchisees operating in nine countries around the world.
In July 2021, Neighborly was acquired by KKR for an undisclosed amount, but likely amounts to one of the biggest acquisition deals in the history of franchising.
“We are excited to embark on our next chapter of growth with KKR’s support and global expertise and look forward to continuing to be a partner of choice for both customers and franchise owners in the years to come,” said Mike Bidwell, president and CEO of Neighborly.
“Neighborly stands out for its differentiated strategy of bringing together adjacent services under a diversified and tech-enabled platform, and – most importantly – for its unrivaled dedication to customer service. We are thrilled to be investing in the Neighborly team,” said Felix Gernburd, managing director at KKR.
Thompson Street Capital acquires Freddy’s Frozen Custard and Steakburgers
Thompson Street Capital is a private equity firm based in St. Louis, Missouri. The firm focuses on service, manufacturing and distribution businesses.
Freddy’s was founded in 2002 in Wichita, Kansas. The brand opened its first franchise location in 2004 and now has 360 franchised and 30 company-owned locations.
The burger brand was acquired by Thompson Street Capital in March 2021 for an undisclosed amount.
“There remains a large segment of the country where we are not present and by partnering with TSCP we will be better able to expand in those areas and continue our strong growth going forward,” said Randy Simon, co-founder and CEO of Freddy’s.
“We look forward to working with the outstanding team at Freddy’s to accelerate the Company’s already exceptional growth,” said Bob Dunn, managing director at Thompson Street Capital Partners.
“Franchises are businesses with stable incomes and outgoings when operating as normal, which makes them ideal for private equity firms that don’t want to sit on cash reserves.”
Tutor Doctor acquires Code Wiz
Tutor Doctor is an internationally renowned children’s education franchisor that set up shop in 2000, and began franchising in 2003. The brand now operates in 16 countries with over 680 franchised territories in the hands of approximately 340 franchisees.
Code Wiz was founded in 2017 and offers each student a customizable, student-driven style for teaching coding and other computer skills that are in high demand.
Tutor Doctor acquired Code Wiz in March 2021 for an undisclosed amount.
“With Tutor Doctor’s extensive experience in educational franchise management, Code Wiz will be able to plug-in to a proven business model and established structure that will propel the brand further into the world of franchising,” said Ruth Agabji, founder and CEO of Code Wiz.
“This acquisition provides us the opportunity to add rocket fuel to our mission of changing the trajectory of students’ lives by bringing more diverse education to students around the world,” said Frank Milner, president of Tutor Doctor.
Xponential Fitness acquires Rumble
Xponential Fitness is a family group of boutique fitness brands, and was founded in 2017 in Irvine, California. The group is home to nine boutique fitness brands, and in its own words, is a ‘curator’ of fitness brands.
Rumble was founded in January 2017 as a boxing-inspired group fitness concept in New York. The brand has expanded into a number of cities, including Los Angeles, Washington DC, Philadelphia, and many more.
Xponential Fitness acquired Rumble in March 2021 for an undisclosed amount.
“We are thrilled to announce our deal with Xponential. They are certainly the premier franchisor in our industry and thus the perfect partner to bring the Rumble experience across the globe,” said Andy Stenzler, co-founder of Rumble.
“Our loyal Rumble customers will love being part of the amazing family of Xponential brands that will cater to all of their fitness needs. We are looking forward to seeing Rumble grow with such an incredible industry leader,” said Ashley Camerini, CEO of Rumble.
FAT Brands acquires the Global Franchise Group
FAT Brands started out with Fat Burger, the famous American burger brand. Success with Fat Burger saw the formation of a brand group that over the years, acquired fast-food brands such as Buffalo’s Cafe, Yalla Mediterranean, Ponderosa & Bonanza Steakhouse and many more. FAT Brands operates six food brands with over 380 franchised units around the world.
The Global Franchise Group was founded in 2010 with the acquisition of NextCen Brand’s brands and operated more than 1,400 franchised and corporate stores in 14 countries.
Fat Brands acquired the Global Franchise Group in June from Serruya Private Equity and Lion Capital for $442.5m.
“Now that the economy is emerging from COVID-19 and restaurants are rapidly recovering, we are pleased to have reached this agreement to incorporate a powerhouse restaurant franchising group,” said Andy Wiederhorn, president and CEO of FAT Brands.
“Andy has an exciting vision for FAT Brands and through his recent acquisitions, he has been able to create brand synergies within the portfolio while maintaining an asset-light business model,” said Michael Serruya, managing director at Serruya Private Equity and chairman of the board of GFG.
Service Brands acquires TWO MEN AND A TRUCK
ServiceMaster Brands is a privately owned group of franchise brands that provides services in the areas of disaster response and restoration, janitorial services, professional home cleaning, furniture repair and home inspections. The group started in 1929 and has over 7,000 company-owned and franchised locations around the world.
TWO MEN AND A TRUCK was founded in 1985 and today, is the largest franchised moving company in the U.S., with over 350 locations dotted across the country.
ServiceMaster Brands acquired TWO MEN AND A TRUCK in August 2021 for an undisclosed amount.
“We are confident the combination of our mission of exceeding customers’ expectations with our shared commitment to innovation will drive further growth for both TWO MEN AND A TRUCK and ServiceMaster Brands,” said Jon Nobis, CEO of TMTI.
Restaurant Brands International acquires Firehouse Subs
Restaurant Brands International (RBI) is a group of brands in the QSR industry with names like Burger King, Popeyes and Tim Hortons to its name. The company was formed in 2014 when Burger King and Tom Hortons underwent a $12.5bn merger, and acquired Popeyes in 2017.
Firehouse Subs was founded by former firefighters, Chris and Robin Sorensen. The brand has 1,200 restaurants to its name and is present in 47 U.S. states, Canada and Puerto Rico.
Restaurant Brands International acquired Firehouse Subs for a $1bn all-cash deal.
“Firehouse Subs is a special brand with a talented team, impressive culture and community focus that resonates with guests and closely aligns with our core values at RBI,” said Jose Cil, CEO of Restaurant Brands International.
“At Firehouse Subs we are united in our commitment to and passion for hearty and flavorful food, heartfelt service, and public safety,” said Don Fox, CEO of Firehouse Subs.
