What FRANdata Thinks

Impact of the Pandemic on the Mega 99

February 15th, 2021 by Ritwik Donde

Frandata has been running the Mega 99 list for Franchise Update for more than 10 years. Needless to say, we’ve seen many nationwide and worldwide events, most of which are being eclipsed by the current pandemic in terms of the significant rise in franchise activity. The following four factors are among those that have affected this year’s Mega 99 Rankings.

Bankruptcies and financial protection filings. These filings were initiated by large QSR franchise organizations like SD Holdings and NPC International. While this has resulted in a change in ownership patterns, it is important to note that many franchised businesses/locations continue to operate, but under different ownership.

Leadership consolidation. The pandemic also has allowed several large franchisee organizations to consolidate their leadership through acquisitions and resales. Franchisees in certain sectors such as QSR have been quick to take advantage of lower valuations to grow their existing portfolios. For example, Tasty Restaurant Group, a wholly owned affiliate of private equity firm Triton Pacific, acquired 37 Pizza Hut locations, while Sun Holdings, one of the largest franchisee organizations in the U.S., acquired 41 IHOP locations from bankrupt CFRA Holdings for its ever-expanding portfolio.

Franchisee diversification. Another growing trend affecting this year’s Mega 99 Rankings is related to franchisees’ diversification strategies, which took advantage of franchisors’ fee incentives and discounts during the pandemic. For example, several franchisees in the fitness and gym sector diversified into other beauty-related options that showed greater business resistance to pandemic-related closures and shelter-at-home orders.

Increased PE activity. The pandemic also saw emerging brands attracting private equity firms and getting them to sign large multi-unit deals in 2020. For example, Chunara Group of Companies, a private equity group based in Atlanta (which already owned franchises including Dunkin’, Checkers, Church’s Chicken, and Popeyes), signed a 9-unit development deal with My Eyelab. PE and asset management firms also signed large deals with Everbowl (20 units) and Coolgreens (50 units). Interestingly, PE and investment firms signed large deals with established brands that were quick to adapt their business model to the changes pushed forth by the pandemic. These include the 49-unit deal signed by Papa John’s with HB Restaurant Group, and the 50-unit development deal signed by Freddy’s Frozen Custard & Steakburgers with R Solution Holdings.

*This originally appeared in Multi-Unit Franchisee Q1 2021. Click here to review the article on their website, as well as the full rankings.

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