Franchise Equity Partners (FEP), an independent private investment firm, has launched as a portfolio company of investment funds managed by HPS Investment Partners LLC (HPS), a global alternative investment firm with more than $75 billion of assets under management.
FEP will focus on partnering with successful owner operators across the U.S. franchising sector with an initial target portfolio size of $1 billion. The firm is led by cofounders Michael Esposito and Scott Romanoff, who serve as managing partners. They are both retired partners from Goldman Sachs and previously worked together at the firm for more than 28 years.
The company will make passive, permanent, minority equity investments alongside established and scaled owner-operators across the U.S. franchise ecosystem spanning an array of industry verticals, including hotels, restaurants, automotive dealerships, beverage distributors, heavy machinery and other consumer and business services including health, beauty and fitness. Thanks in part to substantial backing from its investor group, FEP is strategically positioned to structure and execute permanent, flexible investments that are tailored to the diverse needs of U.S. franchise owner-operators who may be seeking to pursue organic and inorganic growth or diversification strategies, or to assist in estate planning and other shareholder dispositions, the company reports.
“The U.S. franchising sector is an important, growing and attractive portion of our economy that we believe is currently underserved in terms of financial equity-based options suited to the unique financial and strategic goals of its operators,” said Esposito. “Our bespoke approach, creativity and extensive investment experience, coupled with our strong capitalization, allow us to focus on the individual needs of entrepreneurs we invest alongside to help them meet and exceed their business objectives. Importantly, our capital and returns will be fully aligned with the success of our partners.”
Romanoff added, “We established FEP to address the equity capital needs of established U.S. franchisees. Ranging from growth to diversification to generational transfers and recapitalizations, we are committed to serving as a strategic financial and business partner to this community and to providing dependable and flexible permanent capital. We are very excited about what the future holds for us here at FEP as we pursue this unique and compelling opportunity.”
Esposito and Romanoff retired from their respective positions at Goldman Sachs in 2020. The former was previously chairman of the Global Financial Institutions Group at the firm, and the latter held a range of positions within the firm’s Investment Banking Division and the executive office, including head of corporate development and co-head of the Financial Institutions Financing Group.
FEP is currently actively reviewing multiple transactions across its target verticals and looks forward to engaging with established and scaled operators across the U.S.