As Private Equity Interest in Franchising Increases, FRANdata Expands Services

ARLINGTON, VA, January 16, 2011 (Press-News.org) Private equity companies have an estimated $500 billion to invest, and FRANdata is using its expertise in the franchise marketplace to help them do it.

The independent research company that tracks and analyzes the franchising activities of every brand in every industry is often called upon by private equity firms to help them identify brands that meet their target performance metrics, and provide due diligence research as the deal progresses.

"Private equity companies like investing in franchising because franchises tend to have a well developed brand, predictable and recurring revenue stream and their CapX needs are usually modest," explained FRANdata CEO Darrell Johnson, who used to work in mergers and acquisitions and private equity before focusing on franchising. "There have been some fairly high EBITDA multiples out there in the franchising acquisitions, which demonstrates that perceived value."

Johnson is referring to the recent private equity acquisitions of Burger King at 9x EBITDA and Papa Murphy's estimated to be at 10x EBITDA.

With the current estimated capital overhang of $500 billion which will have to be invested soon or given back to the investors, and private equity firms' proven penchant for franchise brands, FRANdata is expanding its services to meet the expected spike in activity.

The services for private equity companies include:

1. Identify acquisition and investment targets from the entire universe of all companies that franchise in the United States
a. Build profiles of franchise brands that meet the criteria of private equity company's M&A strategy
b. Build valuation estimates and model returns based on historical EBITDA, royalty revenue and unit growth

2. Use FRANdata' s reputation and market awareness to pre-screen potential investment partners and introduce private equity companies to key executives at companies in the market for investment

3. Perform Due Diligence
a. Provide the details of a franchise's historical financial performance and business operations.
b. Understand the industry and the competition to provide context for a franchise's performance
c. Identify and assess efficiencies and challenges within the target's franchise operations
d. Examine the franchisee-franchisor relationship history, unit economics, and system continuity

Johnson expects the services to increase through 2011 as the private equity market heats up and takes advantage of the seller's market created by the recent credit crisis.

About FRANdata
FRANdata (www.frandata.com) is an independent research company that tracks and analyzes the franchise industry. The Arlington, Va.-based company was founded in 1989 and receives no advertising or other fee arrangements that might influence its objectivity. FRANdata is often cited as an expert in such leading media as The New York Times, The Wall Street Journal and The Washington Post.