It’s a time for due diligence and reflection, not panic.

Private equity’s appetite for franchises has surged over the past two years. Roark Capital bought Subway for nearly $10 billion and a majority stake in Dave’s Hot Chicken for nearly $1 billion. During the same period, Blackstone purchased Jersey Mike’s, and KKR acquired Nothing Bundt Cakes.

It’s not just restaurants, of course. Main Post Partners recently bought senior care franchise HomeWell. Overall, the trend shows no signs of slowing: Goldman Sachs cited a 40 percent industrywide jump in deal volume heading into 2026.

This might be good news for PE firms looking to maximize their return on capital, but what does it mean for franchisees? How should they approach a change of ownership?

They shouldn’t get overly excited—or anxious—until they’ve done their homework. Fortunately, there’s a great resource right at their fingertips. Reviewing the Franchise Disclosure Document (FDD) of other brands the PE firm owns will show how they operate, and what might be in the cards for newer franchisees.

Start with item 2 of the FDD, which discloses who runs the company, the officers, directors, and key executives. After a PE acquisition, this section might reveal significant leadership turnover. That tells you that the PE firm likes to install their own people at the top to call the shots.

That isn’t a bad thing in and of itself, but the new leadership team, particularly if they have an eye on growth and top-line revenue, might deviate from prior leadership by mandating new, higher marketing spend or technology investments. Alternatively, they might require franchisees to switch to higher-markup vendors. Any one of these moves can impact the franchisee’s bottom line.

As the next step in their due diligence, franchisees should dig into item 3 in the FDD, which discloses any material lawsuits, arbitrations, or government actions involving the franchisor or its officers and directors in the past 10 years.

A spike in litigation after a PE acquisition is a major red flag for the franchisees, though it’s important to know it may be seen as a positive by shareholders. Compare the volume and type of litigation from the years before the acquisition to the years after. A brand that jumps from two lawsuits pre-PE to 15 afterward is likely signaling a clear shift in the franchisor/franchisee relationship.

From there, franchisees should turn a careful eye towards the financials outlined in item 19 of the FDD. Look at the pre-PE ownership numbers versus post-PE ownership. Are average unit volumes going up, flat, or down? If the franchisor reports cost data, are margins stable?

That last point is important. Fees are covered in items 5 and 6 of the FDD, and together with item #19, they can help uncover any hidden financial headwinds that the franchisee might plan for. One example could show that revenues are going up at a franchise after a PE firm has purchased it, but profitability is going down because costs are now higher.

Alongside this document review, franchisees should speak directly with operators of other franchises who lived through the P/E transition. Every FDD is required to include contact information for all current franchisees in item 20. Aim to speak with 5-10 franchisees who were in the system before the PE acquisition and are still operating. These are the people who can tell you what changed for them and their business.

It’s also worth checking in with the Franchise Advisory Council (if there is one—some newer or smaller franchises may not) to get their feedback on the new corporate leaders and initiatives implemented.

With all this research in hand, franchisees should then do some financial scenario planning based on what they’ve learned.

Scenario 1: Everything stays the same—no new fees, flat sales. This is the exception.

Scenario 2: Sales are up significantly due to P/E investments in technology and marketing, with minimal increase in fees. This could create the perfect opportunity to improve site profitability and create excess cash available for growth.

Scenario 3: Sales are flat, or maybe go up a bit, but franchisees have new operational requirements, causing an increase to the labor line. This could create an increase in gross revenue with a corresponding increase in cost of services. Consider how this changes the picture?

Scenario 4: What if fees rise 2 percent and sales potentially decline? Can your P&L statement survive it? Do you, as a franchisee, want to try to survive it?

Running these scenarios gives franchisees clear gut checks on whether staying in the system under new ownership is viable or worth the effort.

A private equity acquisition should not be considered a death sentence for franchisees, but it isn’t a guaranteed golden ticket either. Never forget that the firms that buy a franchisor are laser-focused on their own returns.

The franchisees who come out ahead will be the ones who match that discipline with their own due diligence and reflection. Following a process similar to what was done during the original purchase decision is key. Do that work, and you’ll stay in control of your destiny, no matter who the owner is.

Cody Teets is a principal at The Transition Strategists and has 25 years of experience with McDonald’s working with franchisees.

Source https://www.qsrmagazine.com/story/what-to-do-when-private-equity-buys-your-restaurant-franchise/