Multi-Unit Franchisee Magazine Issue II, 2016

BY EDDY GOLDBERG Consolidation Nation LARGE FRANCHISEES CONTINUE EXPANDING I n the world of multi-unit franchi- people on the money side what they’re sees, the big keep getting bigger. In seeing, and what they look for in a poour Multi-Brand 50 rankings (page tential franchise acquisition. 60), which we began publishing in 2008, the number of units operated by The multiplier effect both the top 5 and top 10 franchisees has “We’ve doubled our size twice,” says climbed steadily since 2010, following a Shoukat Dhanani, president of the Dhapost-recession drop-off when franchi- nani Group in Houston. The first time, sees retreated from growth and instead in 2012, with about 80 Burger Kings in focused on operational efficiency and the Houston area, the company acquired selling or closing under-performing units 101 Burger Kings in the Northeast. In (see table below). November 2014, the company doubled Also during the past decade: many again, acquiring 255 more Burger Kings franchisors worked hard to refranchise from Heartland Foods. Today his comtheir corporate stores; a generation of pany’s total unit count is up to 651 (490 Guillermo Perales retiring franchisees with sizable p ortfolios Burger Kings and 161 Popeyes Louisiana sold them, whole or in part, to other large Kitchens). “We’re still around, and we’re operators; and to help grease the skids for still sane,” he laughs. hard to duplicate.” Sun Holdings now all these asset transfers, bankers relaxed Guillermo Perales, founder and owner operates 649 units in all. their underwriting criteria, alternative of Sun Holdings, says last year was an Greg Flynn, founder and CEO of Flynn lending sources sprang up, and the cof- extraordinary one for growth at his com- Restaurant Group, also had a good year. fers of private equity firms (overfilled and pany. He acquired more than 150 stores, He added a third brand, Panera Bread, searching for investment opportunities) built about 25 new ones, and remodeled becoming the brand’s first new franchisee expanded their strategic and acquisitional about 30 more. “It was an active year in 10 years. Today with 807 total units in sights from franchise brands to franchisee where acquisitions and development fell 28 states—498 Applebee’s, 259 Taco Bells, into place,” he says. “It was a good year, and 50 Paneras—his company is the largorganizations. And the big kept getest restaurant franchisee ting bigger. in the U.S. According to FRAN“Our approach has been data, between 2011 and The number of units controlled by the top 5 and top 10 franchisees in to be very focused within 2015 the largest 100 fran- our annual Multi-Brand 50 rankings has continued to rise, following a a smaller number of conchisees added units more post-recession drop-off. cepts and be geographithan twice as fast as francally diversified We had Year Largest Top 5 Top 5 Avg. Top 10 Top 10 Avg. chising as a whole: while nothing but one concept 2016 1,499 4,839 968 7,273 727 total unit growth among for 14 years—Applebee’s— the 100 largest franchisees and became an expert in 2015 1,400 4,228 846 6,233 623 was 6.1 percent during that that” says Flynn. And when 2014 1,232 3,931 786 5,781 578 period, for all of franchisit comes to financing, he 2013 1,158 3,651 730 5,409 541 ing it was 2.9 percent (see adds, “lenders love that page 66). we’re geographically di2012 1,155 3,565 713 5,127 513 We asked several of the versified.” 2011 766 3,092 618 4,722 472 country’s largest franchisees Only after becoming 2010 676 2,259 452 3,760 376 about their growth stratea “category killer” with gies—how they did it, how Applebee’s did he begin 2009 839 2,594 519 4,011 401 they manage it, and how they exploring other brands. 2008 812 2,707 541 6,740 674 funded it. We also asked two “We made that decision Multi-Brand 50, 2008–2016 by Number of Units 64 MULTI-UNIT FRANCHISEE IS S UE II, 2016 muf2_consolidation.indd 64 4/4/16 4:58 PM

Multi-Unit Franchisee Magazine Issue II, 2016 | Page 68