Franchising Experts Adapt to "New Normal" Amid Economic Challenges and M&A Landscape Shifts

Franchising experts are facing a "new normal" in the world of mergers and acquisitions as they grapple with inflationary pressures and other economic challenges that are reshaping the landscape of dealmaking. Contrary to earlier sunny projections, the market is not expected to undergo significant shifts in the latter half of 2024.

Michael Esposito of Franchise Equity Partners does not foresee any seismic shifts in M&A activity for the remainder of the year, while Charlie Hurt of Fifth Third Securities predicts a modest increase in dealmaking but warns that activity still lags behind levels seen in 2021 and 2022. Hurt anticipates a market acceleration in the second half of the year.

Alicia Miller from Emergent Growth Advisors characterizes the current M&A environment as part of a "new normal" emergence post-COVID, with buyers exercising caution amidst inflation concerns linked to labor and supply chain costs. The fundraising climate within franchising has slowed, with only major investment firms securing the requisite funds for transactions.

Amid economic headwinds, the industry has witnessed a surge in innovative restaurant concepts, with brands prioritizing operational efficiencies and franchisee support over rapid expansion. Despite this, Alex Dunn of Larry H. Miller Company remains optimistic about a potential uptick in M&A activity in the latter part of the year. However, there are lingering apprehensions about the enduring effects of the government's COVID-era stimulus package on franchising and the broader M&A market.