FranConnection 2016: IFA Chairman Aziz Hashim Tells Franchisors to Focus on Unit-Level Economics

Aziz Hashim, International Franchise Association Chairman and CEO of NRD Capital, an Atlanta-based private equity firm, addressed the FranConnection Conference crowd with a very focused message: Take care of your franchisees.

“I have been a part of 14 different systems. I have a strong background in picking great franchisors,” Hashim said. “When underwriting brands, it surprises me how many franchisors fail to take care of their most important asset: Their franchisees.”

After becoming arguably the most respected franchisee throughout the industry, Hashim changed his focus to leading change as a franchisor—as a result, NRD Capital was born, a leading franchise private equity firm that now owns two brands, Cincinnati-based Frisch’s and Dallas-based Fuzzy’s Tacos.

“First and foremost, we are looking for brands who take care of their franchisees,” he said. “When looking at the details of the brand, we look at the product or service they offer and that it is properly differentiated and, quite frankly, one that I like. I want them to offer a product that is something I wouldn’t be afraid to recommend as a user. If you can’t get behind the product as an investor or as a franchisee, it’s not worth it.”

Ultimately, Hashim believes that unit-level economics make happy franchisees.

“We are a franchisee-centric fund and the unit level economics have to work for us to be interested,” he said. “Unit economics means different things to different people. What does it mean to a franchisee? It has to justify leaving a job and doing this business. What’s the number I look for? A $75,000 to $100,000 EBITDA should be the minimum. If a franchisee can’t make $75,000, then, they will struggle, be frustrated and regret taking that risk.”

Hashim said the benefit of looking for great brands to join the NRD Capital portfolio is not the consultancy and leadership that comes from his team, but the ability to plug into his network.

“We have 2,000 qualified multi-unit franchisees in our extended network outside of our fund’s 50 limited partners. All are willing to purchase if we put our Good Housekeeping stamp of approval on a brand,” he said, noting that NRD Capital’s ideal franchisor candidate is a brand with 50 to 150 units. “We want to present our network with a profitable brand that is well managed. We want the management team to have a great attitude toward franchisees. That attitude will be reflected in the profitability of those franchisees.”

The beauty of NRD’s brands, Hashim said, is the ability to plug them into the infrastructure established at acquisition No. 1, Frisch’s.

“Most private equity firms come in and cut,” he said. “When we took over Frisch’s, they had 75 employees. Not only did we not cut, but we have added. We are using Frisch’s as the incubator for other brands, where we can take a Fuzzy’s and plug them into the systems and leadership within the company. Many emerging brands are missing an established infrastructure. We are able to leverage ours to help enhance their companies.”

Many franchisors, he said, fail to really focus on franchisees.

“I want to work with franchisors who understand that their No. 1 customer is their franchisee,” he said. “They are the ones who will be on a path to ultimate success.”