AJ Wasserstein, Peter Mistretta, Michael Horowitz·September 7, 2023

Buy a Franchise Portfolio: How to Choose the Brand

This is a panel/educational episode rather than a single operator interview. Host Will Smith convenes three guests — AJ Wasserstein (Yale SOM lecturer on ETA), Peter Mistretta (founder of Knight Franchise Holdings, currently operating 13 The Joint Chiropractic clinics across Florida and Texas), and Michael Horowitz (former multi-unit Wingstop franchisee who had just exited in June 2023 after five years) — to work through a co-authored case note titled '10 Essential Questions to Consider When Selecting a Franchise Brand.' The conversation covers why MBA-trained acquisition entrepreneurs historically overlook franchising (stigma, royalty fees, franchisor control, limited scalability within stores) and why it can be an attractive ETA path (proven systems, fragmented operators ripe for programmatic acquisition, specialty lending, long compounding runways). The 10 questions address: defining your desired outcome first, choosing the right industry or category (QSR vs. non-QSR), evaluating brand maturity and trajectory (emerging/classic, in-favor/out-of-favor), assessing whether the franchisor earns its royalties, understanding operational flexibility and mandatory CapEx, analyzing franchisee base demographics and density, considering geographic footprint, modeling four-wall unit economics vs. above-store overhead, identifying actionable entry points and franchisor receptiveness, and finally checking personal fit. Both Peter and Michael share their own deal experiences as concrete examples throughout, making this a rich framework episode with real operator perspectives embedded throughout.

Deal facts

notes: Peter Mistretta owns 13 Joint Chiropractic clinics across Florida and Texas, operating for about a year. Michael Horowitz operated a portfolio of Wingstop restaurants for 5 years before exiting (sold June 2023); he started with ~2 partners and grew to a portfolio requiring 20+ units. No specific deal prices or multiples disclosed. Wingstop exit closed in ~45 days, worked with franchise investment bank Unbridled Capital.

Why this business

Peter Mistretta was attracted to franchise consolidation strategies after learning about multi-unit franchise operators like Greg Flynn at Stanford GSB, and chose The Joint Chiropractic specifically because it was an emerging category leader in chiropractic services with limited franchise competition, attractive growth tailwinds, and a membership-based model with compelling unit economics. Michael Horowitz chose Wingstop (QSR) primarily because it offered the scale needed to support multiple partners leaving high-paying finance careers, with hundreds of units available for acquisition and strong historical unit volumes. AJ Wasserstein (an educator/adviser, not an operator) advocates franchising to MBA students as an underappreciated path.

What's working

The Joint Chiropractic's membership-based model creates recurring revenue characteristics uncommon in many franchise systems
Wingstop's strong competitive position in chicken wings and consistently high unit volumes (1M+ AUV) made it a reliable performer
Franchise systems offer brand recognition, supply chain negotiating power, and marketing infrastructure that independent operators cannot match
Fragmented franchisee bases (low density) in emerging systems create programmatic acquisition opportunities
FDD (Franchise Disclosure Document) provides a built-in contact list of all franchisees, enabling systematic outreach for roll-up strategies
Michael Horowitz's Wingstop exit closed in 45 days after running a competitive process through Unbridled Capital, resulting in a price above a direct negotiation would have achieved
Long compounding time horizons in franchise systems can produce decamillionaire outcomes for patient, disciplined operators

What's hard

Royalty fees are a significant cost; the key question is whether the franchisor earns those royalties through brand value, supply chain leverage, and marketing
Franchisors can mandate capital expenditures (equipment upgrades, remodeling) beyond what operators anticipate, increasing unforeseen costs
Franchisors control who can enter the system and can block acquisitions or require development commitments alongside acquisitions
QSR brands are more capital-intensive than service or education-based franchise concepts, creating higher barriers to scale
In dense systems, there are fewer acquisition targets and existing large operators are preferred acquirers, limiting M&A opportunities for new entrants
Franchise systems tend to be labor-intensive with complex turnover challenges, which were especially acute during COVID
Systems with very low per-unit operating profit (e.g., $50k/year) require far more locations to support above-store management infrastructure, creating a disadvantageous unit economics spiral
Entering a declining or out-of-favor brand is extremely difficult to underwrite; catching a falling knife is a common mistake
Some top brands (Chick-fil-A, McDonald's, Domino's) have near-impenetrable entry requirements regardless of operator quality or capital

Notable quotes

There is a stigma to being a franchisee entrepreneur and we jokingly wrote in the case Peter that this is about as uncool as you can get so if you think operating HVAC business is uncool being a franchisee entrepreneur is one step below that.

If your goal is to have a five hundred thousand dollar stream of passive income live in a Beach town and get a residual check from someone who's running your operations you can do a lot more or a lot different things than someone whose goal is to sell their business and personally take home 10 plus million dollars.

What I think this section in the case note really all boils down to is evaluating the question of does the franchisor earn the royalty that you pay it.

Take Subway right now if somebody offered me a big Subway portfolio for two times cash flow I wouldn't even bother reading the materials because I don't know what the revitalization strategy is for Subway but it's not there yet and it's I think very difficult to pay a low enough amount to overcome a declining system.