ExitStrategies BY DEAN ZUCCARELLO AND DAN COLLINS Refranchising Gains Selling corporate stores benefits all players F ranchising has proven to be a successful business model across a wide spectrum of industries us- ing multi-unit retail distribution. At its heart, franchising allows everyone to focus on what they do best: manage, support, and grow the brand in the case of the franchisor, with franchisees focused on delivering a high-quality, consistent prod- uct or service to the ultimate customer. Refranchising (the sale of franchisor- owned units to new or existing franchisees) allows franchisors to address both finan- cial and strategic goals in their business by optimizing the mix of company and franchised ownership. Refranchising has been a hot topic in the restaurant industry in particular, with a number of national chains executing large-scale refranchising initiatives over the past 5 years. The Cy- press Group led most of these large-scale refranchising programs. We see this activ- ity continuing for the foreseeable future, likely spreading to multi-unit segments outside the restaurant industry. Historically, most franchised restaurant concepts have operated under an owner- ship structure that had the franchisors owning and directly operating a βmate- rialβ percentage of their overall system. While this ownership percentage has varied from brand to brand, it was his- torically significant, generally in the 25 to 50 percent range. The thinking was that this level of ownership meant franchisors would lead by example, essentially show- ing their franchisees how to operate the business. Additionally, this direct owner- ship was seen as the best way to align the interests of the brand and its operators. As it has matured, the chain restaurant business has become much more complex. Increased competition, governmenta °ΙΤ΄)± Ρ₯½Έ°‘ ΉΜ₯ΈΡ‘έ½Ι½Ι° Ή½Έ΄)ΝΥ΅ΘΑΙΙΉΜ‘ Ω΅ Ρ‘ΥΝ₯ΉΝΜ)΅½Ι‘ ±±Ή₯ΉΡ½ δΡ‘ ΈΩΘΈ5 Ήδ)‘ ₯ΉΜ‘ Ω½Ή±ΥΡ‘ ΠΉάΡ‘₯Ή₯Ή)₯ΜΉΡΌ ΙΝΜΡ½ ηeΜΉΩ₯Ι½Ή΅ΉΠ°)έ₯Ρ ΙΙ Ή‘₯Ν₯Ή₯Ή₯Ρ₯ Ρ₯ΩΜ½΅₯Ή) Έ₯΅Α½ΙΡ ΉΠΙ ΉΝΡΙ ΡδΈ±Ρ‘½Υ )Ι Ή‘₯Ν½ΙΜ‘ Ω‘₯ΝΡ½Ι₯ ±±δ₯Ή΅ΡΥΉ(άΠ$)5U1Q$΅U9%PI9 !%M$MLU%$°ΘΐΔά)Ρ‘₯Θ½έΉΙΝ‘₯ΐ½ΥΉ₯ΡΜ°Ρ½ ηeΜΙΙ Έ΄)‘₯Ν₯Ή₯Ή₯Ρ₯ Ρ₯ΩΜΡΉΡΌ± ΙΘ Ή)‘ Ω΅½ΙΝΡΙ Ρ₯₯΅Α±₯ Ρ₯½ΉΜΈ)%ΈΙΉΠΙΝΡ ΥΙ ΉΠ₯Ή₯Ρ₯ Ρ₯ΩΜ°έ)‘ ΩΝΈΙ Ή‘₯Ν½ΙΜΌ Μ Θ ΜιΙΌ)½΅Α Ήδ΅½έΉΙΝΡ ΥΙ ΉΡΜΈQ‘ΡΙΉ)Ρ½έ Ι± ΙΘ Ή΅½ΙΝ½Α‘₯ΝΡ₯ ΡΙΜ΄)Ρ ΥΙ ΉΠΙ Ή‘₯ΝΜ‘ Μ‘±Α½ΑΙ Ρ½ΙΜ) °έ₯Ρ Ρ‘΅½Ι½΅Α±₯ ΡΥΝ₯ΉΝΜ)έΝΡ½ δΈ%Π ±ΝΌ‘ ΜΙ Ρ΅ Ή)½Θ± Ι΅Ν ±ΙΙ Ή‘₯Ν₯Ή₯Ή₯Ρ₯ Ρ₯ΩΜ₯Έ)Ή Ρ₯½Ή °ΝεΝΡ΅ΜΝΥ Μ]ΉηeΜ° ΥΙΘ)-₯Ή°ΑΑ±eΜ° ΉQ $Ι₯ εΜΈ)MΌ ΈΙΙ Ή‘₯Ν₯Ήqέ₯Έ½έ₯»t)½ΘΙ Ή‘₯Ν½ΙΜ ΉΙ Ή‘₯ΝΜό%Έ½ΥΘ)αΑΙ₯ΉΡ‘ ΉΝέΘ₯ΜεΟQ₯Ν₯Ή) ΉαΥΡ½ΙΙΡ±δ°έ₯Ρ Ή₯ΡΜ½Θ)½Ρ Ι Ή‘₯Ν½Θ ΉΙ Ή‘₯ΝΈ)Ι Ή‘₯Ν½ΘΉ₯ΡΜ)Ι Ή‘₯Ν½ΙΜ ₯Έ₯ΈΝΩΙ °έ εΜθ ΝΡΘ)ΝεΝΡ΄Ι½έΡ °₯΅ΑΙ½Ω₯Ή Ή₯ °΅ΡΙ₯Μ°) ΉΙΡ ₯Ή₯ΉΩ ±Υ‘½΅½₯΅Α±½εΜ)δΑΙ½Ω₯₯ΉΡ‘΄έ₯Ρ ΅½Ι‘ ΉΜΡΌ) Ω ΉΈMΑ₯₯Ή₯ΡΜ₯Ή±Υθ+ Α₯Ρ °ΙΑ±½ε΅ΉΠΡΌΝεΝΡ΄)Ι½έΡ ₯Ή₯Ρ₯ Ρ₯ΩΜ+₯±₯ΡδΡΌ½ΑΡ₯΅₯ι Α₯Ρ °ΝΡΙΥΡΥΙ+IΥΩ½± Ρ₯±₯Ρδ₯ΈΙΩΉΥ° ΙΈ΄)₯ΉΜ° ΉΙ Ν ±½ά+ ½΅ΐΝ ±ΜΙ½έΡ Ι₯ΩΈδΙ΄)Ήέ½ΥΜ½Έ΅ΉΤ°΅ ΙΡ₯Ή°Ρ ΄)Ή½±½δ°Ι₯΅ ₯Ή₯Ρ₯ Ρ₯ΩΜ°ΡΈ+9άΥΉ₯ΠΙ½έΡ έ₯Ρ αΑ Ή)Ι Ή‘₯Ν½½ΡΑΙ₯ΉΠ°₯ ±±δ₯Έ½΅₯Ή΄)Ρ₯½Έέ₯Ρ ΉάΑΙ½Ρ½ΡεΑΜ Ή½ΙΑ½Ι Ρ)₯Ή₯Ρ₯ Ρ₯ΩΜ₯Ή±Υ₯ΉΉ‘ ΉΙ °ΝΡ Ρ) Ή½ΉΝΡΙΥΡ₯½ΈΙΝ½ΥΙΜ°₯ΉΉΡ₯ΩΜ°ΡΈ+ΉΡΙΑΙΉΥΙ₯ °½Ι½έΡ ½ΑΑ½ΙΡΥΉ€΄)Ρ₯Μ½ΘΙ Ή΅Α±½εΜ)Ι Ή‘₯ΝΉ₯ΡΜ)Ι Ή‘₯ΝΜ°΅½ΝΠ½ΡΈ± ΙΘ½ΉΜ° ±ΝΌ)Ή₯ΠΙ½΄ΙΙ Ή‘₯Ν₯Ή₯Ή₯Ρ₯ Ρ₯ΩΜ° Μ)ΝΈ₯ΈΡ‘₯ΉΙ Ν₯Έ± Ι΅Ν ± ±Μ)ΝΙ₯ ½ΩΈMΑ₯₯Ή₯ΡΜ₯Ή±Υθ+%΅ΑΙ½Ω₯Ή Ή₯ °΅ΡΙ₯Μδ±ΩΘ΄) ₯Ήα₯ΝΡ₯Ή½ΩΙ‘ +₯±₯ΡδΡΌ₯΅ΑΙ½ΩΥΉ₯Π΅±Ω°ΑΙ½₯ΡΜ+ Ι½έΡ ₯ΈΙ Ή‘₯ΝeΜ½ΙΙ Ή)Ι½΄½Ρ ΕΥ₯ΙΥΉ₯ΡΜ ΉΡ‘₯ΘΙ Έ΄)‘₯Ν½ΛeΜΙ Ή₯Ή₯Ρ₯ Ρ₯ΩΜ+Q‘½ΑΑ½ΙΡΥΉ₯ΡδΡΌ ΥΉ₯ΡΜ₯Έ)ΝΥΑΑ±΅ΉΡ °Ι Ή½ΘΙ ΉΜ+Ή‘ Ή ΙΘΑ Ρ‘Μ½ΘΡ‘₯Θ)Α½Α±°Ι½΄ 5Μ Ή΅ Ή ΙΜΡΌΙ½ΉΠ΄)±₯Ή΅Α±½εΜ) ½Ή±ΥΝ₯½Έ)U±Ρ₯΅ Ρ±δ°έ±₯ΩΙΙ Ή‘₯Ν₯Ή₯Μ)‘ΙΡΌΝΡ δΈQ‘Ν₯Ή₯Ρ₯ Ρ₯ΩΜ‘ ΩΡ‘) ₯±₯ΡδΡΌΙΩ₯Ρ ±₯ι Ή₯΅ΑΙ½ΩΡ‘½ΐ΄)Ι Ρ₯½Ή °ΝΡΙ Ρ佡 ©½ΘΙ Ή‘₯Ν)½Ι Ή₯ι Ρ₯½ΉΜΈΙ Ή‘₯Ν½ΙΜΥΉΙ½₯Ή)Ρ‘ΑΙ½ΝΜ Ι₯Ή₯ΉΙΉέΝΉΝ½)ΑΥΙΑ½Ν° Ή Ι½ΥΝ₯Ή½Έ₯ΉΉ½Ω Ρ₯½ΉΜ) ΉΙ Ή΅ Ή ΅ΉΠέ₯Ρ‘½ΥΠ‘ Ω₯ΉΡΌ)έ½ΙΙδ ½ΥΠ ₯±δΙΝΡ ΥΙ ΉΠ½ΑΙ Ρ₯½ΉΜΈ)Ι Ή‘₯ΝΜ ΙΙ ΉΡΡ‘½ΑΑ½ΙΡΥΉ₯Ρδ)ΡΌΙ½άΡ‘₯ΘΑ½ΙΡ½±₯½Μ± ΙΉ½Υ ΡΌ) ±ΡΌΝΡΙ ΅±₯Ή½ΑΙ Ρ₯½ΉΜ°± ΄)₯ΉΡΌΙ ΡΘ₯₯Ή₯Μ°Ν½Α‘₯ΝΡ₯ Ρ₯½Έ°) ΉΝΥΝΜΈ)]‘ΈΝ₯Ή ΉαΥΡ½Θ΄)ΙΡ±δ°ΙΙ Ή‘₯Ν₯ΉΉ½ΥΙ ΜΑ ΙΡΉΘ΄)Ν‘₯ΐέ₯Ρ ΝΡΙ½ΉΑ± εΙΜ°έ‘Ρ‘ΘΉά½Θ)α₯ΝΡ₯ΉΙ Ή‘₯ΝΜ°Ι Ρ₯ΉΝΡΙ½ΉΘ)½ΩΙ ±°ΝεΝΡ΄ ΉΙ½έΡ ½ΑΑ½ΙΡΥΉ₯Ρ₯Μ)½Θ ±°₯ΉΩ½±ΩΈ)Ή°έ‘₯±ΙΝΡ ΥΙ ΉΠΙΙ Ή‘₯Ν₯Ή)₯Ή₯Ρ₯ Ρ₯ΩΜΙ΅ ₯Έ‘½ΠΡ½Α₯°έαΑΠ)ΡΌΝΡ‘₯ΝΥΝΝ₯½ΈΕΥ₯±δαΑ Ή₯ΉΡΌ)Ή½Έ΅ΙΝΡ ΥΙ ΉΠ°΅Υ±Ρ€΅ΥΉ₯ΠΙΡ ₯°ΝεΝΡ΅Μ)Ρ‘ Π ΈΉ₯ΠΙ½΄Ρ‘Ν ΅Ν½ΙΠ½)εΉ ΅₯ΜαΑΙ₯Ή₯ΈΙΝΡ ΥΙ ΉΡΜΈ) ΈiΥ Ι±±Ό₯Μ <) Ή½ΥΉΘ½Q‘ εΑΙΝΜ) Ι½Υΐ°ΑΙ₯Ω Ρ±δ½έΉ)₯ΉΩΝΡ΅ΉΠ Ή¬ Ή Ω€΄)Ν½ΙδΝΙΩ₯Μ₯Ι΄½ΥΝΰ΄)±ΥΝ₯Ω±δ½ΈΡ‘΅Υ±Ρ€΅ΥΉ₯Π) ΉΙ Ή‘₯ΝΥΝ₯ΉΝΜ½Θ)΅½ΙΡ‘ ΈΘΤε ΙΜΈ!‘ Μ΅½ΙΡ‘ ΈΜΤ)ε ΙΜ½₯Ή Ή₯ ° ΉΡΙ ΉΝ Ρ₯½Ή °αΑΙ€΄)Ή₯Έ΅ΙΙΜ° ΕΥ₯Ν₯Ρ₯½ΉΜ°₯ΩΝΡ₯ΡΥΙΜ°)ΝΡΙ Ρ₯Α± ΉΉ₯Ή° Ή₯Ή Ή₯Ή₯ΈΡ‘)ΙΝΡ ΥΙ ΉΠ₯ΉΥΝΡΙδΈ ½ΉΡ Π‘₯΄ ΠΜΐΜ΄(Ψΰΐ΄ΠΔΠΔ½ΘιΥ Ι±±½εΑΙΝΝΙ½ΥΐΉ₯θΈ) Έ ½±±₯ΉΜ©½₯ΉΡ‘) εΑΙΝΜ Ι½Υΐ ΜΑΙ₯Ή₯Α °(Με ΙΜ Ό°½±±½έ₯ΉΜΤε ΙΜ)½αΑΙ₯Ή₯ΈΡ‘ΙΝΡ ΥΙ ΉΠ) Ή₯Ή Ή₯ °ΝΙΩ₯₯ΉΥΜ΄)ΡΙ₯ΜΈ ½ΙΡ‘ Π‘έ ΜMY@) ΉΡΙ ΝΥΙΘ½Q‘]ΉηeΜ) ½΅Α ΉδΈ ½ΉΡ Π‘₯΄ ΠΜΐΜ΄Ψΰΐ΄ΠΔΠΔ)½Θ½±±₯ΉΝεΑΙΝΝΙ½ΥΐΉ₯θΈ