Franchisees

How a Franchisee Super-Group Is Changing the Franchising Landscape

How a Franchisee Super-Group Is Changing the Franchising Landscape
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This story appears in the February 2015 issue of Entrepreneur. Subscribe »

The rise of multi-unit franchisees has been one of the biggest changes in franchising over the past couple of decades. Some, like Arco Dorados, the largest McDonald’s franchisee, are worth more than $1 billion. Others own hundreds of units across dozens of brands. In fact, many multi-unit franchisees have become so large and so good at opening and running units that they could teach their franchisors a thing or two.

Leveraging that capital and experience is the idea behind Aziz Hashim’s new venture, NRD Partners. The multi-unit franchisee, whose portfolio has included Popeyes, Checkers/Rally’s and Domino’s, teamed up with nearly 40 like-minded multi-unit owners to create an investment fund they hope will change the franchising landscape.

Hashim and his franchisee super-group will use their pool of cash to buy stakes in emerging franchise brands; then they aim to help those concepts streamline and tweak their operations and supercharge their growth. It’s a win-win situation—the franchise gets the expertise and cash it needs to grow, and Hashim’s group gets a payday when it eventually sells its interest in the franchise or takes it public.

“The sophistication level of multi-unit franchisees is really high,” Hashim explains. “But this power has never been harnessed or leveraged properly. Our fund is an attempt to pull multi-unit franchisees together and use their horsepower to get into a higher-return business, which is brand ownership.”

We got him to explain just how he’s going to do that. 

How many brands have you bought so far?

In the next 18 months, we’ll announce six to eight acquisitions. We’re focusing on five verticals: food, wellness and beauty, education, healthcare and senior care. 

So will you take over these brands?

Our primary modality will be taking a controlling interest, but it doesn’t always need to be 100 percent ownership. In some cases the founders and key managers will want to remain involved. They may have just been lacking guidance. Sometimes a founder has worked really hard on their business, but their exit value is not as high as they’d hoped. We’ll help them get to that point.

Have brands approached you?

Since we announced our fund last summer, we’ve been pleasantly surprised by how many brands have come to us—at least 14 or 15—especially since we haven’t done any sort of marketing. The biggest reason is that we have matching values. They are companies with founders that have a deep concern for their franchisees and consider them their family and friends. They don’t want to exit their firm and sell it to a company where the future of their current franchisees is compromised. We’ve also been approached by large franchisees with more than 1,000 units, which we weren’t expecting. They want to talk about the fund taking an interest in their company so we can help further accelerate their growth.

Will you recruit multi-unit franchisees into these brands?

No. We think there are several demographics that are underserved in franchising, including Millennials and Baby Boomers who may have lost their jobs but still have 20 years of income left to earn. Our theory is that when basic franchise unit economics are not healthy, the urge for a franchise is to find large multi-unit franchisees that can absorb economic fluctuations. But if a franchise is healthy at the base level, franchisees of any size will do fine. 

We see a big opportunity in propa-gating single-unit franchisees. I mean, that’s where we come from; I started with one unit, and that’s how everyone in the fund started. We know the power of growing and are not afraid to cater to single-unit franchisees. 

What are your other motivations?

There has been a proliferation of franchise brands in the last few decades, and it’s very difficult for franchisees, particularly new ones, to filter through information on thousands of brands and know which ones represent a good opportunity. As an operator and a person who has been in and out of 14 brands, I have some intellectual capital and ability to identify brands with the most potential for franchisees. It’s one way of trying to solve that problem.

Why do you think the industry is so excited about your fund?

Many people have told me this is one of the more innovative changes in franchising in a long time and could fundamentally change the outlook of the industry, using collaboration to chart the future. That has never been the case before. Franchisees and franchisors have always been in separate silos. This is an evolution in the way that relationship will move ahead. It’s a far more integrated approach and makes that franchisee-franchisor relationship much more balanced.