Investor Takeovers of Franchise Systems

Within the last decade, private investment firms, hedge funds, and corporations with excess cash have rushed in to perform franchise mergers and acquisitions with a view toward increasing profitability and then reselling the business to another buyer or going public. Frequently, these investors are taking over franchisors their founders built and that enjoyed a warm, family atmosphere.

The strategies of most investment firms for the franchisors they acquire can be summed up in three words: “strip and flip.” That means that they will find ways to strip the “fat” out of the business in order to increase profits, then “flip” the business by selling it to a new buyer. And who pays? The franchisees.

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Is This Happening In Your Franchise System?

Typically, when private equity performs a franchise takeover, you can expect to see one or more of the following tactics:

  • The franchisor increases royalties and fees.
  • The franchisor increases the number of franchisees, often to the detriment of existing franchisees.
  • New franchise agreements that are more restrictive and more expensive.
  • The investor replaces established management that is knowledgeable about the business with whiz kids, bean counters or “professional” franchise executives.
  • The franchisor reduces services to franchisees and shifts burdens to them.
  • The franchisor may try to make franchised businesses worth less so it can buy them up on the cheap.

The result is, in short, a massive shifting of wealth and profits from franchisees to the franchisor.

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How Can Garner & Ginsburg, P.A. Help If Investors Take Over My Franchisor?

What We've Done
  • We stopped the acquisition of the Great American Cookies by Mrs. Fields, and made Mrs. Fields come to the bargaining table to negotiate the rights of the Cookie Company franchisees.
  • When a Fortune 100 company tried to sell off its franchise system to an unqualified buyer, we intervened and obtained a settlement for the franchisees in the millions of dollars.
  • When the investment company that owned our clients’ franchisor tried to make franchisee businesses worthless by prohibiting them from selling, we went to both court and arbitration and won in both venues. Our clients are now free to sell as they wish.

You Are Not Alone

The franchise takeover attorneys at Garner & Ginsburg, P.A., protect the rights of franchisees in Minneapolis and throughout the country and have recouped millions of dollars against some of the biggest adversaries in the industry. Learn more about the legal counsel an experienced lawyer can provide by scheduling a free consultation. The firm can be reached through an online contact form or by calling 612-259-4800.

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