Rise of Refranchising and Franchisee Activists Connected?

McDonald's drive-thru

Often pushed hard by activist investors, refranchising, which is selling corporate-owned stores to franchisees, has been a prominent occurrence in the franchising world of late. But how's that working out for franchisees, both existing and new ones?

This has been a bad couple of months for proponents of refranchising, as a growing number of franchisee revolts have shed light on the limitations to the most popular strategy for operating restaurant brands.

The asset-light model of running a restaurant system has been all the rage for years. Companies from Papa Murphy’s to Uno to Yum Brands to McDonald’s and everybody in between have sold stores to franchisees.

In so doing, companies concentrate on franchising. And they make stronger margins, no longer responsible for building locations or hiring workers. In theory, franchisees do a better job, anyway, and are closer to the customer. —Jonathan Maze, Restaurant Business