The Franalyst

🍟🍔🍕🌭🌮🍦

[The Franalyst @thefranalyst]

Culver’s 2025 data is out 🚨

The midwest burger giant had another big year:

• Avg revenue: $4,145,665 (+7.5% YoY)
• Avg EBITDA: ~13% (corporate locations)
• Grew to 1,041 locations (+44)

Only 4 failed franchises in 37 years - one of the steadiest brands out there 💰

[The Franalyst @thefranalyst]

For operators with agency, yes.

But your typical franchise buyer isn't that.

They're 1st time business buyers with ZERO conviction they can be successful on their own -

Nvm navigate the hundreds of decisions you have to make to launch an SMB.

AI isn't changing this*

*Speaking from the brick & mortar biz perspective, home services could be different

[Ben Bortner @Slackwatercap]

I hadn't really thought about it before, but the value of a buying into a franchise system is GREATLY reduced in an AI world. Most of the benefits franchisors bring to franchisees can be replicated or built with AI fairly easily these day. Certainly for start-up franchises.

[The Franalyst @thefranalyst]

Anyone have a time machine?

I woke up in 2021 when people actually believed these threads :(

[Bobby Graham @BobbyBizScout]

If you work a W2 job and don't have a boring business that pays you $5k-$10k a month on top of your salary...

I got you.

Here are 9 boring businesses for sale today (& where to buy them):

[The Franalyst @thefranalyst]

@IlirSela @slice Noted, good stuff

[The Franalyst @thefranalyst]

@IlirSela @slice Didn't know that.

What is the reverse part though? In theory you're doing what franchises (the good ones, at least) do by design...?

[The Franalyst @thefranalyst]

@jamesonhaslam @kylehtucker is legit

[The Franalyst @thefranalyst]

@girdley Unfort has been the case since late ‘24

I assume rage bait slop drives incredible user engagement

[The Franalyst @thefranalyst]

@roblabonne She has a history of being dishonest and deceptive about SMB ownership, while selling a $10,000+ course/community.

Has absolutely nothing to do with her gender.

[The Franalyst @thefranalyst]

@SullyBusiness You can't teach 2nd gen ownership

[The Franalyst @thefranalyst]

@jonpbaker Yup, same 😢

Unfortunately rage bait and mass market slop drives better higher usage & engagement for the majority of X users

[The Franalyst @thefranalyst]

@Dirtdog Utah Fried Chicken

[The Franalyst @thefranalyst]

@markbdelaney 😂

Keeps me sane

[The Franalyst @thefranalyst]

I could write a book on emerging franchise development at this point but some quick thoughts:

1) Good concepts don't *need* to use brokers

But if they can afford it and want faster growth (that they can support), no reason to not use them.

Why?

2) The LTV of a franchisee is incredibly high

If a brand has:

• $1M AUV
• 6% royalty
• 10 year franchise agreement

That's $600k in lifetime royalty revenue per location.

So a 3 unit deal = $1.8M in LTV.

Paying a broker ~$50k for acquiring that "customer" isn't crazy, assuming the brand gets them open & operating.

The problem is...

3) Most emerging concepts aren't good

(There's a reason it's rare to see transparent financials in an FDD).

The 3 unit deal that was sold, rarely gets built.

The operator stops at 1 because the ROI isn't there to build more.

They're stuck in entrepreneur "purgatory".

But the broker got paid and is selling the next shiny new concept.

4) The "industry" is a conveyor belt of mediocre concepts

There's a bunch of consulting firms "selling the dream" to unsophisticated SMB founders who have an avg at best business.

"Pay us $100k-$150k to get you turned into a franchise. We'll connect you with brokers, and you'll have 100 locations open in a few years and sell to PE"

The founders have no idea what they're getting into.

Some of them even give up big chunks of their royalty streams on day 1.

The founders have zero financial plan for how they can support any growth that may occur.

This compounds issue #3 - and is far and away the foundation of any problems downstream.

Brokers getting paid is sustainable if the brands knew what they were doing / were legit concepts!

With all that said...

5) Everything's fine? (if you zoom out)

Despite the above, year after year, the stats on franchising are positive:

Total franchise locations open, number of jobs created, etc. are always increasing.

The pie keeps getting bigger, not smaller.

AND every few years there's a break out concept that scales nationally with real staying power.

Dave's Hot Chicken, 7 Brew, OrangeTheory, Club Pilates, KidStrong are a few in the last ~15 years.

You could argue the lack of regulation/strict oversight is a deliberate feature -

It's a GOOD thing concepts don't have to jump through many hoops to try their hand at the franchise lottery.

The quality rises to the top quickly - and the failures of the rest are "casualties of entrepreneurship".
--

^I'm not saying I agree with #5...but it's an alternate perspective on the ecosystem that I've thought about.

Inviting more regulation and rules can create unintended problems / ripple effects.
--
Anyways TLDR -

If you're a new brand and you're insecure about sharing financials in the FDD, then please don't franchise.

You're delusional to ask people to invest hundreds of thousands $$$ without sharing the potential ROI.

And if you're evaluating a franchise concept - talk to every franchisee you can before making a decision.

That matters far more than anything else!!

[Dan Reese @DanReese21]

The traditional model of selling franchises is broken.

Franchise fees are intended to fund an infrastructure of franchisee support. Instead, an outsized amount of the $ goes to sales commissions.

Which often leaves franchisors, especially emerging ones, wildly undercapitalized.

This means they:

-> Can’t build a proper franchisee support structure

-> Must entertain outside investment (thus introducing a different incentive structure)

-> Feel pressure to sell units to potentially unqualified candidates

-> Are tempted to nickel and dime franchisees via excessive royalties, fees and markups to make ends meet

It’s a mess.

At Laundry Spot we’re doing it our way. And it’s working.

Here’s a breakdown of our franchise sales expenses YTD:

Broker commissions: $0
Broker network fixed fees: $0
FSO commissions: $0
Conferences: $0
Travel: $0
SEO: $0
Organic marketing: $0

Every single lead is from our organic social media. Written by us.

Being a well-capitalized franchisor gives us the freedom to have an abundance mindset & create tremendous value for our franchisees.

Some big news on that front coming soon.

[The Franalyst @thefranalyst]

@BetterCeo @DanReese21 Agree on #1.

But no franchise starts as "a brand that attracts customers day 1". It's inherently a local biz, even with. multiple locations.

But if #1 is there, eventually it can become #2 with the right franchisees building for you.

[The Franalyst @thefranalyst]

Subway franchisees:

[The Franalyst @thefranalyst]

@girdley

[The Franalyst @thefranalyst]

Subway franchisees:

[Jonathan Maze @jonathanmaze]

New, from me: A survey from an independent group of McDonald's franchisees highlights the challenges presented by the chain's recent weakness.

Profitability is down just as operators prepare to spend an expected $400k-$700k on a remodel. And franchisees don't think they're profitable enough to make it work.

https://t.co/m8QqLSmRn7

[The Franalyst @thefranalyst]

@Daniel__McCarty @PaulTTran @McFranchisee It's a good idea, a few doing this that aren't national yet, and usually with a twist (for example - Peruvian rotisserie chicken is a big thing)

The YT vid is a one off restaurant but they crush it (there's also regional chains like Pollo Tropical)
https://t.co/eRTqtu5ZkW

[The Franalyst @thefranalyst]

@girdley Bummer

Bowls, salads, wraps, smoothies, AND pizza....healthy or not, you gotta pick a lane

[The Franalyst @thefranalyst]

@McFranchisee Interesting, have heard the exact opposite with Tim H franchisees in the US.

Skeptical of the dunkin impact. If you’re blaming CPG in a brand like that you have bigger problems, but perhaps I’m biased bc most of my convos are with 50+ unit operators

[The Franalyst @thefranalyst]

7 Brew just finished testing "ready to drink" coffee in 96 Walmarts -

They'll now be expanding to over 4,400 Walmarts across the country.

Big win for franchisees - this gives massive brand exposure as they continue to build hundreds more drive-thru locations this year