Coalition of Franchisee Associations

January 16, 2024

When You Get Really Big, Who's Your Buyer?

Your franchisor, of course - RBI (BK), to buy Carrol Group's 1,000 BK stores

"Burger King ultimately plans to refranchise the restaurants to “smaller franchise operators who live in their local communities.” 


Anonymous said...

Does this signal a industry wide return to smaller operators?

Richard Adams said...

Yes, but the trend actually began almost ten years ago when companies like McDonald’s started selling their company operations to franchisees, called “refranchising.”

Big restaurant companies no longer wanted to be in the restaurant business.

The most expeditious way to accomplish this was to sell large chunks of stores or markets to large franchisees. The larger the franchisees get, the greater the chance of failures impacting the parent company. But there are also issues of operational quality and sales development.

It always irritates some people when I say this, so I don’t say it often: One of the reasons that McDonald’s grew to dominate the industry in the 1970s was a preference for the smaller, on-premise Owner/Operators who grew one store at a time. Who knows what might have happened if McDonald’s had continued to grant territories and the like, favoring the larger Operators?

Anonymous said...

The issue was McDonald's looked at how much O/O's were making per restaurant in the 80's so they said let's expand, and grow with O/O's in size they'll make the same income and all is good McDonald's if a small market had four restaurants doing $2.5m ($10m for the market) now the market has six restaurants doing $2m ea. (the market is doing $12m) McDonald's makes more money O/O grew with restaurants (thinks that's great) and makes the same amount of income, but think his equity has increased. I remember when restaurants sold for $1 on $1 crude analytical thinking but that's the way it went down and any reinvestments were always on the buyer. Those days are long gone, last thing McDonald's wants is a seller taking cash out of the system.