Column: Four Buyout Pitches, and No Franchisee Vote

Count them. In about a week, four publicly traded franchisors have had buyout offers land in public.

Trian, Flynn Group and two investment firms offered $7.35 a share to take Wendy's private. Cobblers Cove Capital and Arkhouse Management put $39 a share in front of Dine Brands, whose board answered with a poison pill. Fund 1 Investments pitched $5.61 to $7.00 a share for Xponential Fitness. And on Tuesday, Foodtastic took a C$43 offer for MTY straight to shareholders after the board turned it down twice.

Read the letters side by side and they rhyme.

The Wendy's group wrote that "private ownership is the better path and provides the patient, long-duration capital needed to restore the business and the franchise system to a position of strength." Fund 1 told Xponential's board it could focus on "rebuilding studio-level demand, generating free cash flow and strengthening its balance sheet, without the pressure of quarterly reporting." Foodtastic says MTY's brands need "patient, long-term focus."

I don't think they're wrong about the diagnosis. Wendy's has posted six straight quarters of same-store sales declines. Xponential's stock fell from $6.76 to $3.74 while its sale review produced nothing public. MTY has written down $220 million of acquisitions since 2020, by Foodtastic's count. Public markets are bad at waiting for a franchise system to heal, and these boards know it.

Here's what bothers me. Every one of these pitches is addressed to a board and a shareholder register. The people whose livelihoods ride on the answer, the franchisees, are on neither. They pay the royalties that make these companies worth buying. They don't get a vote.

Flynn Group is the partial exception, and it's a telling one. A 340-plus unit Wendy's operator sitting inside the buying group means at least one franchisee's view of unit economics is at the table. I said last week that franchisees are becoming the buyers, and I stand by it. But one big operator's seat is not the same as the system's voice. The Dine offer surfaced through unnamed sources with no public plan at all.

Then there's the debt. Patient capital is rarely cheap capital. Wendy's carried roughly $2.4 billion of net debt as of June, Reuters reported. Xponential had about $522 million of long-term debt against $25 million in cash, according to Franchise Herald. A take-private doesn't erase those balances, and depending on how a deal is financed, it can add to them. In a mostly franchised company, the thing a lender underwrites is the royalty stream. That's the franchisees' money.

So if I owned a Club Pilates studio or an Applebee's, here's what I'd want any buyer to say out loud: how much of every royalty dollar goes back into marketing, technology and field support, and which brands are on the block. MTY has already said brands it has no growth plan for could find new owners. A new owner could say the same thing faster.

What I don't know is whether any of these closes. Dine's pill is designed to slow a buyer down. MTY's board has refused to engage. Wendy's committee has promised nothing. Xponential had not commented when the bid surfaced. It's entirely possible all four boards say no and the stock prices drift back to where they were.

But the buyers have made one argument the franchisees should hold them to. They keep saying the franchise system needs patience. Then put the patience in writing, somewhere the franchisees can read it.