Ajinkya Mhatre’s Post

MOD Pizza and Private Equity: A Crucial Lesson for Franchise Investors🍕 The recent news about MOD Pizza contemplating bankruptcy (and now announced acquisition by a PE firm) serves as a sobering reminder for investors in the franchise restaurant space. It underscores the inherent risks and potential pitfalls that come with private equity's involvement in rapidly growing franchises. MOD Pizza once dazzled the market as America's fastest-growing big restaurant chain, even eyeing an IPO as recently as 2021. However, despite rebounding from the pandemic, MOD Pizza’s aggressive expansion strategy may have paved the way for its current financial distress. From just 14 locations in 2013 to a staggering 467 by 2019, MOD Pizza's growth was nothing short of meteoric. However, this expansion was not met with a proportional increase in average unit volumes, which only rose by a modest 8%—barely keeping pace with inflation. Rapid expansion without corresponding sales growth is a red flag for any franchise investor. 🚀📉 The involvement of private equity added another layer of complexity. A $200 million investment aimed at fueling this growth came with its own set of expectations. Investors demanded rapid expansion to maximize returns, pushing MOD into costly leases and significant corporate overhead. This high-stakes approach often overlooks the importance of sustainable growth, leading to long-term vulnerabilities. Unlike Red Lobster's post-pandemic struggles, MOD Pizza's issues are rooted in a different but equally concerning set of decisions. The reliance on an IPO to resolve financial strains didn’t materialize, leaving the company grappling with soaring costs, stagnant sales, and mounting debt. For franchise investors, the takeaway is clear: the allure of rapid expansion can be misleading, and the pressure from private equity can exacerbate financial instability. The increasing financial distress of restaurant franchises could cast a shadow over future investment opportunities in the fast-casual sector, making deals more challenging and potentially deterring future investments. As a franchise attorney, I always advocate for prudent growth strategies that prioritize long-term sustainability over short-term gains. This situation serves as a critical lesson for all stakeholders in the franchise restaurant space. What are your thoughts? Could this scenario reshape investor and operator perspectives in the industry? #franchise #franchising #restaurants

What is the Oldest Franchise that's Still Operating today? Did you know that the oldest franchise still operating today is A&W Restaurants? As a franchise consultant, I find A&W’s story particularly inspiring and a great example of enduring success in the franchise industry. Founded in 1919, A&W started as a simple roadside drink stand in Lodi, California, where Roy W. Allen served a new creamy root beer formula to returning World War I veterans. Just two years later, Allen partnered with Frank Wright, and the brand we know today was born. What makes A&W remarkable is its ability to maintain its nostalgic charm while evolving to meet modern tastes and preferences. They were pioneers of franchising, setting the stage for the business model that many successful chains use today. Here are a few reasons why A&W has stood the test of time: Strong Brand Identity: A&W’s brand is synonymous with classic American dining, evoking a sense of nostalgia with its root beer floats and all-American menu. Adaptability: While they cherish their heritage, A&W has also embraced innovation, updating their menu and services to keep up with contemporary trends and customer demands. Community Focus: A&W franchises are often locally owned and operated, fostering a strong connection with their communities. This local focus helps build customer loyalty and a personalized dining experience. A&W’s story is a testament to the power of a strong brand, community connection, and the ability to adapt and innovate. If you're considering entering the franchise world, A&W's journey offers valuable lessons on longevity and success. Have you ever visited an A&W? Share your experiences and thoughts about this iconic franchise!

If every McDonald’s is supposed to be the same, why are so many so bad (or good)? https://ift.tt/g5zOyvC Halfway through the 2016 film The Founder, there’s a scene in which McDonald’s venal CEO, Ray Kroc (played by Michael Keaton), tracks down a franchisee on a golf course. Kroc has just discovered that this man’s McDonald’s franchise has drifted away from Kroc’s vision of McDonald’s as “the new American church” and has instead fallen into a derelict hangout for greasers, filled with litter—and, worst of all, that lettuce was somehow finding its way into the hamburgers. The irritated franchisee, who had been talked into opening a McDonald’s as an easy, hands-off investment, balks at Kroc’s micromanagement. “You said this would be a good place to park our money,” he tells Kroc.  The depiction of a frustrated Kroc, who walks away while flipping off his insubordinate franchisee, begins to provide an answer to a question that nags at every fast-food customer—and intrigues us at Fast Company: How is it possible for a McDonald’s to be good or bad? Isn’t McDonald’s just McDonald’s? As we looked into this further, compiling a list of the best and worst reviewed locations of McDonald’s, Burger King (coming 8/20), Taco Bell (8/21), and KFC (8/22) nationwide, we found a host of factors that contribute to restaurant variability. Fast-food franchises implicitly promise a uniform experience across stores, but the reality is that there’s an important intermediary between brand and consumer: the franchise owner. How those owners operate their locations can have significant effects on their restaurants’ performance. “Some people say, I want to write a check [to open a franchise], and it’ll pay for itself,” says Kenny Rose, CEO of FranShares. The franchisee in The Founder is an example of this, an owner who expects a franchise to function like a bond, generating returns with no need for direct operational oversight. “But you’ve got other people who are owner-operators,” Rose says, who “are really hands-on. It’s very, very different there.”  Subscribe to the Compass Newsletter.Fast Company's trending stories delivered to you daily The approach a franchisee takes at one store is likely to carry over to the rest of their restaurant portfolio. A Fast Company analysis of McDonald’s locations, for example, found that franchisees with at least one restaurant in the top 25% of scores on Google Maps reviews commanded an high average score of 3.76 for all their other locations, while franchisees with a restaurant in the bottom 25% averaged a low score of 3.40 across their other restaurants. While that might not seem like a big difference, it’s more than one standard deviation. The franchise owner is what separates a good McDonald’s from a bad one.  The notion that closing the gap between ownership and operation results in a better working environment and higher customer satisfaction is perhaps best exemplified by Chick-fil-A, which emerged as the hi...

Navigating the Challenges of Food Franchise Ownership: Initiating the venture into food franchise ownership commences with a pivotal decision – the selection of the right franchise. In a market saturated with numerous options, each boasting distinctive strengths, aspiring entrepreneurs are faced with a critical choice. To surmount this initial hurdle, a thorough research process is essential. Factors such as brand reputation, franchisee satisfaction, and market demand must be carefully considered. Making a well-informed decision at this stage serves as the foundation for a prosperous and successful venture.

Why are so many franchisees diversifying with non-food brands? Thanks Entrepreneur Magazine for letting me help with this piece. Some of the biggest food franchisees are now expanding with nonfood franchises...check this out to see why.

This is one of our favorite success stories to date. Let’s talk about @Burger King’s bold move! Even giants like Burger King encounter challenges in the franchise world. Let's dive into their recent shift acquiring franchise locations. 🍔 Many brands like Burger King rely heavily on franchisees, minimizing physical asset ownership. 🍔 Unlike McDonald's, Burger King's purchase of franchise locations raises eyebrows at potential struggles. 🍔 What's behind this move? It might suggest a push for more control and brand revitalization. 🍔 Implications for the Franchise Landscape: Burger King's strategy prompts smaller franchisees to assess their own operations. 🍔 Speeding up store renovations aims to elevate customer experience and regain competitiveness. 🍔 Parent company Restaurant Brands International juggles innovation and franchisee relations. Enjoyed this fun case study? Follow us for more!

Navigating the Challenges of Food Franchise Ownership: Initiating the venture into food franchise ownership commences with a pivotal decision – the selection of the right franchise. In a market saturated with numerous options, each boasting distinctive strengths, aspiring entrepreneurs are faced with a critical choice. To surmount this initial hurdle, a thorough research process is essential. Factors such as brand reputation, franchisee satisfaction, and market demand must be carefully considered. Making a well-informed decision at this stage serves as the foundation for a prosperous and successful venture.

🚀 Exploring the Billion-Dollar World of Fast Food Franchises! 🍔🍟 Together with Rgand, we continue to report on the latest trends in the restaurant industry and food tech. Today, we're diving into the bustling $289 billion fast food franchise industry, where giants like Wingstop, Scooter’s Coffee, Jersey Mike’s, and Tropical Smoothie Cafe are reshaping the market. 1. Wingstop impresses with efficient operations and strong growth, drawing attention with celebrity franchisees like rapper Rick Ross. 2. Scooter’s Coffee stands out as America's fastest-growing quick-service franchise, offering significant growth with competitive fees. 3. Jersey Mike’s combines rigorous training and effective marketing to deliver solid returns on investment, making its franchise selection tougher than Harvard. 4. Tropical Smoothie Cafe captivates with consistent growth and a fresh tropical menu, now expanding under Blackstone's ownership. Dive deeper into these dynamic franchises and uncover the opportunities in fast food franchising: https://lnkd.in/dyzbBtaa 

Title: McDonald's: The Franchise Giant's Journey to Global Domination Introduction McDonald's recognized by its iconic golden arches, stands as a testament to franchising success. Its journey from a local restaurant to a global fast-food empire is a story of business acumen, adaptability, and relentless innovation. The Early Days - Origin: Founded in 1940 by Richard and Maurice McDonald in San Bernardino, California. - Evolution: Transitioned in 1948 to a hamburger stand using a production line system. @RayKroc's Vision - Pivotal Year: 1954, when Ray Kroc, a milkshake mixer salesman, partnered with the McDonald's brothers. - First Franchise: Opened in 1955 in Des Plaines, Illinois, marking the start of the McDonald's Corporation. - Growth: Rapid expansion, with the 100 millionth hamburger sold by 1958. Franchising and Global Expansion - Franchising Strategy: Kroc's vision for uniformity and quality control across franchises. - International Growth: First international franchises in Canada and Puerto Rico in 1967. - Current Reach: Operates over 38,000 locations in more than 100 countries. Adaptation and Innovation - Menu Diversification: Introduction of iconic items like the Big Mac (1968) and #HappyMeal (1979). - #technological Advancements: Incorporation of digital kiosks, mobile app ordering, and AI in drive-thrus. Economic Footprint - Financials: Generated approximately $23.08 billion in revenue in 2023 - Employment: One of the world's largest private employers. Navigating Challenges - Health and Nutrition: Addressing concerns about the nutritional value of fast food. - Environmental Impact: Initiatives for sustainable packaging and waste management. Conclusion McDonald's story is a blend of entrepreneurial spirit, operational efficiency, and the ability to adapt to changing consumer preferences. It remains a key player in the global fast-food industry, constantly evolving to meet new challenges. - #McDonaldsSuccessStory - #FranchisingExcellence - #GlobalFastFood - #RayKrocVision - #McDonaldsInnovation - #GoldenArchesLegacy - #BurgerEmpire - #FastFoodTrends - #McDonaldsGlobalReach - #EntrepreneurialJourney - McDonald's