Multi-unit Franchise Acquisition on West Coast

This one came across our desks and is pretty interesting.

A group out of Houston is under LOI to purchase a set of historically above-average franchised hair solons in Southern California.

One thing to like is the smaller fund size with them needing about $6mm in equity. So mere mortal LPs can be a bigger chunk of the deal.

There also appears to be cash flow during the hold period, which is appealing to many — though it’s been fascinating to us how some people don’t want cash flow because it’s often taxed as ordinary income. (But, we digress..)

In addition, the group doing the deal is long-standing franchise operators that have been rolling up a variety of attractive franchises for years now. The operating partner on the deal was formerly the COO of the franchisor for the brand under contract. Big benefit there.

A COVID resurgence and the regulatory environment in California getting worse for business by the year are macro risks, of course, that we’d want to dig into with the sponsor on how to mitigate those. Beyond, that the execution risk is top of mind.

Their teaser is here and you can get more information by entering your email in docsend:

https://docsend.com/view/wpxbnuvat85yffyq 

Happy hunting!