The Franalyst

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 💰

Reminder: In brick & mortar you either die a hero or live long enough to become the villain. Everyone loved PopUp Bagels when the founder opened the first few stores. This model is literally what the original was, but they took PE $$ so of course the narrative changes

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

Anyone have a time machine? I woke up in 2021 when people actually believed these threads :(

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!!