Michael Horowitz·April 17, 2023

How to Build a Portfolio of 20 Franchise Locations | Michael Horowitz Interview

Michael Horowitz is a former venture capital analyst and real estate investor who, after an 18-month conventional search stalled in New York, teamed up with two finance-industry friends to acquire a portfolio of Wingstop franchise locations in Columbus, Ohio. In 2018 they purchased 7 units doing approximately $5.6M in revenue and $700K EBITDA for a price in the low $4 millions, financed with a conventional (non-SBA) lender alongside equity contributions from the three partners. Within two years the two partners elected to stay in their W-2 jobs and Horowitz bought them out around May 2020 — coincidentally when Wingstop was surging as a Covid-era delivery-heavy beneficiary. He subsequently opened additional units through a development agreement and made two more acquisitions (7 units in Cincinnati in late 2021, 1 in Dayton in 2022), reaching a 20-location portfolio. The episode covers the mechanics of franchise-system search — using FDDs for contact lists, getting franchisor buy-in before chasing deals, and the approval-process risk — as well as the operational realities of the 5-20 unit 'hardest band,' the acute labor challenges of QSR, and the tradeoffs of operating within a brand system (menu and standards constraints offset by centralized supply chain and brand equity). Horowitz is candid that QSR is a high-effort industry but bullish on the financial opportunity and on ETA as an asset class broadly.

Deal facts

purchase price: low $4 millions (initial 7-unit acquisition)
sde ebitda: ~$700k EBITDA (initial 7 units); grew to 20 units
revenue: ~$5.6M (initial 7 units)
financing structure: Conventional lender (not SBA) with debt service coverage and lease-adjusted leverage covenants; equity filled by three partners; later refinanced to extract equity and fund expansion
notes: Bought 7 Wingstop locations in Columbus, OH as initial acquisition; subsequently bought 7 more in Cincinnati (late 2021) and 1 in Dayton (July 2022); signed 5-unit development agreement and opened additional units; bought out two partners around May 2020. Total portfolio reached 20 locations.

Why this business

QSRs offered scale (500+ units in mature systems), multi-decade tailwinds from dining-out share gains, recession resilience due to lower price points, and growing delivery/online ordering trends. Wingstop specifically had best-in-class unit economics and white-space development opportunity, plus a fragmented franchisee base of small operators ripe for consolidation.

What's working

Wingstop's delivery-heavy model made it a major Covid beneficiary, driving massive sales volume increases during 2020-2021
Built a strong above-store leadership team: VP of Operations (former 40-60 unit operator), controller with large-network experience, and a Philippines-based admin for data entry
Franchise system removes many operational burdens: centralized supply chain, menu R&D, brand standards, and vendor negotiation handled by the franchisor
Reached a point where owner could take a 2.5-week honeymoon to Asia and the business ran without him
Development agreement in Columbus gave exclusivity and a playbook for opening new units with existing infrastructure (employees, vendors, product) to backstop new openings
Fragmented Wingstop franchisee base (mostly 1-3 unit operators, often older entrepreneurs) created acquisition opportunities over time

What's hard

Labor market in restaurants is extremely challenging and worsening over time — difficulty finding, retaining, and motivating hourly employees is the dominant ongoing pain point
Operating in the 5-20 unit range is the hardest scale: enough complexity to need senior staff, but too small to afford every role, leaving gaps filled by over-stretched leaders
Ghost kitchen experiment in Columbus (one year) failed due to extremely tight kitchen space and disproportionately high rent — closed after one year
Starting with only 7 units meant all three partners could not quit their jobs; eventually two partners stayed in their W-2 jobs and had to be bought out around May 2020
Partner buyout coincided with Covid chaos, requiring refinancing and increased debt load
Franchisor approval is a significant gatekeeping risk — sellers can be steered to other buyers preferred by the franchisor
Wingstop's predominantly small-unit franchisee base makes large bolt-on acquisitions rare; growth relies heavily on slower unit-by-unit development

Notable quotes

I started getting interested in search a couple years out of undergrad. I began my career in venture capital. I learned about search somewhere along the way and started to think wait a minute — I just talked to a business that has no business model, no revenue, some users, and is going to get valued at tens and tens of millions of dollars. You're telling me for that same pool of capital I could go buy several businesses worth millions and millions of dollars of cash flow? That seems like a much better bet.

The easiest size business to run is the biggest that you can possibly do and the hardest to run is 5 to 20 units. And then the next easiest to run is one.

I got married last year, I went on a honeymoon for a little over two weeks, and I called the team the second I landed. We went to Asia. They said, 'Michael, don't call us for two weeks, we've got this, don't worry.' And it was really stressful to do and listen to, but I said okay, and I didn't talk to them for two and a half weeks, and got home and everything was cruising. It was awesome.

You got to start with the brand. It's not worth your time to go find a franchise deal from a willing seller, do all of your homework, spend all of your money, and then show up on the franchisor's doorstep with them not having any idea who you are and say, 'Hey, we have a deal to buy this business and enter your system.' You got to do it the other way — introducing yourself to the brands you're interested in, explaining why you're interested in them and what your plans are, making sure they give you their blessing, and then going to hunt for acquisitions in that brand.