Franchise Model vs Oranic / M&A

December 17, 2025

by a searcher from New York University - Leonard N. Stern School of Business in New York, NY, USA

I am looking for perspectives on acquisition of a franchise model, particularly from operators and searchers who have evaluated or completed franchise acquisitions as part of a search. I’m interested in how you assessed unit economics, franchisor support, and the balance between operational autonomy and system constraints versus acquiring an independent business. Would also welcome insights on financing structures (SBA vs. seller financing), post-acquisition value creation levers, and any lessons learned—positive or cautionary—when comparing franchise acquisition to a traditional search acquisition.

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Reply by a searcher
from New York University in New York, NY, USA

Willie, good to speak with you again. I’ve been spending time evaluating franchise opportunities, both starting new franchises and acquiring existing ones. What initially attracted me to franchising was the scalability and the relatively straightforward path to growth through add-ons. Without a deep M&A background, franchises can lower the bar to executing roll-ups versus sourcing and integrating independent businesses. That advantage is obviously less pronounced for someone who has spent years in IB or PE. Another clear benefit is certainty of becoming an operator. With most franchise systems, you can be running a business within three months if you choose to start a new location. That doesn’t mean you’ll make money, but the barrier to entry is relatively low. For someone who simply wants to operate a business as soon as possible, franchising is one of the fastest paths. That said, I’ve consistently run into several issues when evaluating franchise opportunities. First, existing franchises that are for sale are usually available for a reason. If a nearby operator or multi-unit owner isn’t stepping in, it’s often a signal that something is wrong. In many cases, these should be “no-brainer” acquisitions for insiders, which is precisely why their availability raises questions for an outside buyer. Second, when it comes to starting new franchises, most concepts miss the “Goldilocks zone.” Many are too small and lack meaningful brand recognition or competitive advantage. In those cases, you’re often better off working at a strong independent operator for a couple of years, learning the business, and then starting your own shop without franchise fees or restrictions. At the other extreme are highly developed franchise brands that are selling leftover territories, typically smaller, less attractive markets with quirks that explain why no one has taken them yet. These systems may be strong overall, but the specific territories available often cap upside from day one. The real opportunity, in my view, sits somewhere in the middle, brands with genuine recognition and/or a real edge in the industry, whether through unique customer acquisition channels, supplier relationships, or structural advantages that materially improve unit economics versus going independent. You want a brand that is established but not oversold where the remaining locations limit your upside. Overall, I’m fairly skeptical of most franchise concepts (95% of what’s out there). Starting a new franchise can be low risk financially (often under $300k with SBA financing), but it’s high risk in terms of time and frequently low reward. A lot of franchise concepts are more like jobs than businesses. Territory constraints and system rules often limit upside, and it can take years to build something meaningfully scaled. That said, there are a handful of concepts where I think the risk-reward can make sense.

Reply by a searcher
from University of St. Thomas, Houston in New York, NY, USA

I would be very weary of franchises that are newer with lots of availability. Franchises often fail first in support. If your goal is roll-up strategy, then focus on established brands that have been around and proven their system, gone through economic cycles, and have proven their evolving support of franchisees over time.

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