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Advisory 2010-11-16

IPO and M&A: Adding Value To Franchising

Franchising is a proven and tested business model for easy, rapid and cost-effective expansion of a brand. However, Initial Public Offering (IPO) and Mergers and Acquisitions (M&A) are heavily opted by the franchisors to secure financial returns. Explore.

By Ramanjit Kaur Feature Writer

In a franchise business, IPO is gaining popularity as a viable strategy to obtain cash and additional leverage opportunities. Today, many companies are taking the IPO road to fuel their franchise business. Also, a company opting the IPO route is susceptible to attract potential partners for mergers and acquisitions (M&A). Taking a franchising company public is a big step and gives the company working capital for franchise expansion. But before, taking it public, it is important for the company to be registered with the exchange that the company's stock will be traded on and appropriate regulatory body of the nation. Besides this, getting started with an IPO also involves other factors like scale of the firm, quality of the management teams and the prospects for sustainable and profitable growth.

IPO in franchising

IPO no doubt is an excellent transaction for franchise companies. A franchisor usually takes the IPO route to meet the demands for the brand in the market. Once a franchisor has decided to take up IPO to leverage his company, a beta site is constructed. The success of the beta site decides the future of the strategy. Beta site is more like a pilot franchise, on the success of which depends the entire franchise expansion plan of the company. The IPO strategy is perfect for a franchising business in terms of its growth and expansion as it provides cash to the franchisor and liquidity to its non-management investors. Therefore, it is essential to market the IPO of company in order to create excitement among the public. This is because IPO to a great extent is a public belief in the vision and capabilities of the company.

Advantages of IPO route

IPO is a latest trend which is set to drive the franchising industry towards new heights. Companies like Jubilant FoodWorks, Cantabil and few more others, have recently announced their IPO plans in order to raise funds for their franchise expansions. The reason behind opting for IPO is because of the following benefits:

  • It strengthens the market position of the brand through promotion and franchising by expanding its operations
  • Provides exit funds to private equity investors who have stakes in the franchisee's business
  • It also helps in clearing present debts of the company and improves debt to equity ratio.
  • It aids in expanding the franchisees’ business in new territories
  • It is beneficial for corporate purposes

M&A offering best deals

M&A apart from IPO is also considered as a best deal that adds value to the franchising business company. Buying, selling and combining companies aid flow of cash and growth of the company. For instance, Yash Birla Group has acquired major stakes in Kerala Vaidyashala and entered into a joint venture to enter the wellness industry. As Yashovardhan Birla, Chairman, The Yash Birla Group says, “We have finalised Kerala Vaidyashala (KV) after scrutinising various proposals because of KV’s 15 years of experience in its field and it has given us the leverage to its existing 20 plus stores and good market presence.”

Mostly companies are acquired for two main reasons:

  • To expand to newer geographies
  • To enter newer product categories

But M&A can be profitable deal if handled with utmost care. It is always recommended to take the help of professionals with considerable knowledge and expertise..In short, IPO and M&A strategies can create wealth both for the franchisor and the franchisees in any franchise businesses if these strategies are structured, evaluated and executed well.

Comment
AMIT KUMAR PANDEY 01, Aug 2010 at 10:31 PM
Pls reply me soon with details to take franchies in my city.
yatin 10, Aug 2010 at 06:49 AM
lease or franchise deal
Piyush rathi 13, Aug 2010 at 02:23 AM
I like to start your gaming zone in my city so plz send me more detials of it or contact thank you
Sumit Rastogi 17, Aug 2010 at 07:53 PM
I want to franchise of zapak gample in my city MORADABAD (U.P). So please help me to take it.
Kshitij 27, Aug 2010 at 02:20 AM
I would like to start this gaming zone in my City-Rajkot.
Sarvesh Chaudhari 06, Feb 2011 at 04:23 AM
Please reply me i am also interested to open ur franchise in my city
mukesh mittal 14, Feb 2011 at 12:57 AM
dear sir, i am already running a big gaming parlour in delhi with an area around 5000 sq feet. i would like to know more about this zapak gaming , if i like i would love to add it to my gaming center.
Rohan Tara 15, Mar 2011 at 11:29 AM
I'm interested in knowing more about the zapak gameplex franchise.
Dipak Mandrencar 19, Apr 2011 at 07:20 AM
I would like to start an Gameplex in city in Goa , Kindly provide me with the details for going forward . I own a commercial space of 1450sq. ft in a city Mapusa in GOA. Kindly provide me with the details for franchising. Rgds Dipak
neeraj 05, Jan 2012 at 01:28 PM
pls send me detail about franchisee option.
Jyothi Rohilla 05, Jun 2012 at 06:08 PM
HI, I am interested is taking up zapak gameplex franchise in my city vishakaptnam. kindly provide the details to proceed further on my email id. i believe that our city is coming up in a very big way and it will be benefited to the people, company as well as personally.
Abhay Chaudhary 04, Jul 2012 at 05:05 PM
HI, I am interested is taking up zapak gameplex franchise in my city Sirsa (Haryana). kindly provide the details to proceed further on my email id. i believe that our city is coming up in a very big way and it will be benefited to the people, company as well as personally.
janardan kashiram panchal 09, Aug 2012 at 06:44 AM
pls send me detail about Zapak Gameplex.investment.requier space.
Ajit Barve 04, Sep 2012 at 09:35 AM
Please reply me i am also interested to open ur franchise
vaibhav 16, Nov 2012 at 05:54 PM
please provide details of frenchies
arun khera 15, Jan 2013 at 05:15 PM
hello i am arun khera i want to open a franchise of ur company in my city i am from malout(punjab). in our cities game king franchises are going on and our city people are too much willing to play the games so provide me the complete detail so that i can go through ur needs. do the needful.
swapnil 10, Apr 2014 at 07:17 AM
please provide details of franchise
praphull 24, Apr 2015 at 01:10 PM
hi
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