The Investing Strategy in the Franchising and Multi-Unit Retail Sector

The Raw Selection Private Equity Podcast reveals why Franchise Equity Partners (FEP) has zeroed in on franchising and multi‑unit retail as a high‑impact investment arena. Franchised brands dominate a sizable slice of the U.S. and global economies, offering scalable marketing power while leveraging local entrepreneurs to run brick‑and‑mortar locations. FEP’s brand‑friendly stance sidesteps the typical private‑equity aversion to leveraged flips, allowing them to partner with franchisors who value long‑term stewardship over short‑term exits. This niche focus differentiates them from the crowded residential‑services space and other over‑invested sectors.

FEP’s capital structure further amplifies its strategic edge. By aligning with HPS Investment Partners—a BlackRock subsidiary managing roughly $250 billion—the firm accesses institutional‑scale funding while retaining operational flexibility. The partnership emerged after evaluating 25 potential investors, ultimately choosing HPS for its deep relationship history and expertise. FEP employs a dual‑track investment model: traditional control buyouts and a “minority passive permanent” strategy that secures key consent rights without demanding full ownership. This hybrid approach appeals to family‑owned franchises and OEM‑backed auto dealerships, offering owners continuity and investors a stable, long‑term upside.

The firm’s first non‑franchise, European acquisition—IMO, the continent’s largest car‑wash operator with 720 sites—illustrates how FEP translates its thesis into actionable deals. European regulations create high entry barriers, limiting new competition and supporting higher EBITDA multiples in the company‑owned model. By purchasing IMO at mid‑single‑digit EBITDA multiples, FEP identified a clear value‑creation runway through operational upgrades and market consolidation. The deal underscores FEP’s willingness to move beyond U.S. franchising, applying its disciplined, under‑leveraged investment lens to sectors where private equity presence is thin, ultimately delivering differentiated returns for its limited partners.