Emilee Wentland
In 2024, after Restaurant Brands International purchased Carrols Restaurant Group, Burger King had plans to update and refranchise about 600 of Carrols’ 1,000-plus locations. In 2025, plans remained the same—despite the former Carrols locations outpacing franchisee-owned restaurants.
Comparable sales for the portfolio of acquired Carrols units were up 4.8 percent in the third quarter compared to the year prior, according to the brand’s third-quarter earnings report. For the nine months ended September 30, sales were up 2.3 percent year over year. (This includes data from 14 Popeyes stores in China, which RBI bought in 2024.)
In comparison, United States comp sales were up 3.2 percent in Q3 and up 1.2 percent at the end of September.
But Burger King is still going to sell these stores to operators. Despite these stores’ performance, there are still benefits to shifting to an asset-light model, said Matthew Wizmur, an attorney at Spadea Lignana. “The main benefit is you have franchisees who are excited, just like they would be if they were opening a new location,” Wizmur said. “They’re excited to get into the system and to continue the growth that has already been established by the corporate outlet.”
Some franchisors choose to keep a lot of corporate outlets, while others have one or none at all.
Church’s Chicken, for example, has about 175 corporate-owned outlets, which accounts for roughly 11 percent of its unit count. Church’s CEO Roland Gonzalez told me during a reporting trip to Atlanta last summer that the brand is re-evaluating that ratio. “We’re definitely looking at finding the right franchisees to come and strike deals to where they can take some of these company restaurants on but with large development agreements,” he said.
Convenience store chain Circle K owns nearly 80 percent of its stores. At Panera Bread, the split is about 50-50. On the other end of the spectrum, 1,500-plus-unit Tropical Smoothie Cafe has just one corporate location in Atlanta. Subway, which has more than 36,000 global locations, doesn’t have any.
Maintaining corporate locations has its benefits, too.
“They could continue to grow the store. It is generating revenue for the franchisor as well,” Wizmur said. “Instead of maybe getting royalties [from a franchisee], you’re getting the whole piece of the pie.”
Of course, franchisors can sell locations only if someone is willing to buy them. The buyer, whether a new franchisee or an existing one, can make or break the success of refranchising efforts. If the franchisor finds a good contender, their first step is doing due diligence and sending financial reports and other important information to the buyer.
From there, the buyer sends a letter of intent with an outline of the terms discussed, though Wizmur said this isn’t legally binding. Next, attorneys will write up an asset purchase agreement, which includes all the pre- and post-sale terms, conditions and other notes to protect each party. Once that’s signed, the franchisor and franchisee can work toward closing the deal.
“The process doesn’t have to be over-complicated,” Wizmur said. “Those steps are not meant to create an insurmountable process, meaning we want to make it the most efficient and most streamlined as possible, so that the franchisee can get in there, start running the new franchise. … We want to, most importantly, protect our clients’ interest, but also do it efficiently and not waste anybody’s time.”
Refranchising to revamp
Regenerative medicine franchise QC Kinetix was once the belle of the sustainable growth ball. In 2023 it took the top spot on the Franchise Times Fast & Serious list, which ranks fast-growing brands based on three-year growth rates, percentage sales growth and other factors. It ended 2023 with 184 locations. But in 2024 it closed 17 locations, ending the year with 167 units. Sales took quite the tumble, too, down 28.6 percent in 2024 to $112 million.
The brand brought in a new CEO, Mark Montini, in the summer of 2024 to replace Scott Hoots. “When going over those closures, approximately half of those I would call strategic,” Montini told my colleague, Matthew Liedke. “It was where we worked with an owner and realized closing a clinic in their market was in the best interest of the owner and market as a whole. The other half was organic, with clinics that were not able to continue on from a financial perspective.”
After a year-long pause on franchising, QC Kinetix started to offer franchise opportunities last year. The brand is considering the sale of roughly a dozen corporate locations to new and existing franchisees. Jose Mora, a three-unit franchisee in Maine, told Matthew: “Collectively, as a brand, it’s a reflection of the energy and momentum being pumped into this. We did go through a downturn, but Mark [Montini] has done a really good job navigating us through the turbulent waters and we’re starting to come out of that. There’s a big opportunity now.”
Potbelly is another company using refranchising as a means of brand resurgence.
In 2022, the sandwich franchise announced its plan to refranchise a quarter of its stores as well as hit 2,000 locations in 10 years, 85 percent of which would be franchised. About 78 percent of Potbelly’s 441 locations are corporate-owned as of the end of 2024. In 2022 and 2023, the brand sold or closed 52 shops. Last year, c-store chain RaceTrac took Potbelly private in a deal valued at about $566 million.
Burger chain Red Robin’s growth path may involve refranchising. With 498 restaurants as of year-end 2024, about 82 percent of them are corporate owned. In July, the company announced plans to “tactically refranchise” some company-owned restaurants to help manage expenses and reduce debt.
It can be hard to let go. But just like it’s probably time for me to get rid of half-finished craft projects that I’m never going to complete, franchisors need to be honest about when it’s time to move on.
Emilee Wentland is managing editor of Franchise Times, and writes the Continental Franchise Review® column in each issue. Send interesting legal and public policy cases to [email protected].