Are umbrella franchisors the next big thing? A look at pros and cons of umbrella-owned franchises plus 2021 news
Many umbrella franchisors beefed up their portfolios in 2021. Does this make the individual brands they own more attractive or less so for entrepreneurs who want to own a franchise? As with most investment decisions, there are pros and cons to examine when deciding whether to go with a standalone company instead of a sibling within a family of brands.
For instance, a standalone franchise can unfurl the personal touch. You’ll probably be able to chat one-on-one with the founder and/or CEO as you winnow your decision on a franchise investment – and even after you’re in the fold. Standalone brands with slim bureaucracy tend to be nimble, finding it easier to roll out new products, switch suppliers/vendors and brainstorm challenges.
But the umbrella franchises have their benefits. One overall plus may be that they have the backing of deep-pocket investors who lend stability and staying power when times are tough because of a sluggish economy, weather disasters and the current grind of the pandemic.
Economy of scale helps umbrella franchisors secure advantageous contracts with vendors for everything from restroom paper towels to cleaning supplies, foods and other types of operational supplies, and machines to software. They often have seasoned executives – some with enticingly diverse expertise – at the helm; these leaders can put their experience and contacts to work in negotiations to help franchisees. The umbrella franchise companies may be able to be more cost-effective because of cost-sharing for services such as accounting, legal, and human resources.
So what are some of these umbrella franchisors and what did they do last year? Let’s start with a biggie: Restaurant Brands International.
Restaurant Brands International (RBI)
Restaurant Brands International, the owner of huge legacy brands like Popeyes, Tim Hortons and Burger King, announced the acquisition of Firehouse Subs for $1 billion this past December. The sub franchise, launched by brothers Chris and Robin Sorensen in 1994, started with a single location in Jacksonville, Florida.
FAT Brands can ring the bell for multiple wow moves. Its Twin Peaks deal, for $300 million, made headlines in early September, but FAT Brands scored an even bigger deal with Global Franchise Group in June to the tune of $442.5 million – which brought Great American Cookies, Hot Dog on a Stick, Marble Slab Creamery, Pretzelmaker and Round Table Pizza under its wing. FAT Brands also bought Fazoli’s for $130 million and Native Wings and Grill for $20 million.
Lots of brands changed hands last summer when KKR investment group locked up the purchase of the Neighborly home-services franchise. More than two dozen brands – among them Mr. Rooter and Molly Maids – comprise Neighborly. (Neighborly subsequently launched an app as an important marketing tool to connect customers with its diverse home services.)
Horse Power Brands
In October, Horse Power Brands bought Heroes Holiday Lighting and simultaneously announced plans to rebrand it as Blingle!, expand its services, and award dozens of franchises right away. Horse Power Brands also owns Mighty Dog Roofing.
Outdoor Living Brands
At the close of the year, Outdoor Living Brands acquired Superior Fence & Rail. The 20-year-old fencing company complements Outdoor Living Brands’ functions: porch and deck construction, landscape lighting services, and conservation-focused irrigation.
Spring gave birth to Propelled Brands, an umbrella established with an eye toward acquiring and developing service-focused brands. Propelled started out with FASTSIGNS International Inc. and acquired NerdsToGo, whose franchisees provide information-technology services.
Summer saw the formation of Unleashed Brands, created by Urban Air Adventure Park, with an initial acquisition of Snapology, whose franchisees provide children with enrichment activities emphasizing STEAM (science, technology, engineering, arts and mathematics) subjects.
BELFOR Franchise Group
Also in summer, BELFOR Franchise Group brought Redbox+ on board. Redbox+ provides dumpsters and portable toilets on construction sites. BELFOR is known for commercial and home-service brands Hoodz, Ductz, The Patch Boys and Delta Restoration Services.
Private equity and large investors
In April, Advocate Aurora Enterprises acquired Senior Helpers, a franchise that provides non-medical and wellness services in clients’ homes. Senior Helpers operates in more than 40 states and has sites in Australia and Canada.
Roark Capital is a private equity firm and the majority owner of Focus Brands (Auntie Anne’s, Cinnabon and Jamba) and Inspire Brands (Arby’s, Dunkin’, Sonic Drive-In), acquired several franchises in 2021, including Mathnasium, a learning center franchise, that has 1,000-plus sites globally. Roark-backed company Youth Enrichment Brands bought i9 Sports, a franchisor that operates sports camps and clinics for kids at more than 170 U.S. franchise locations. And back in May, Roark acquired Nothing Bundt Cakes, a specialty bakery franchise.