what makes franchisees part of the structure here?

Question

any information from the background information indicating that?

Answer 1

Thomas said it: it’s written in the case description: “VegDigi is a restaurant franchise player :)

Just a clarifying side note: In the restaurant industry it’s very important to differentiate between chains and franchises. Those are two different business models. In a chain all the restaurant revenues belong to the corporate. In a franchise network each franchisee is a different company, so the revenues of their individual restaurants belong to the franchisees and not to the corporate. The corporate gets the revenue from the franchisees in form of the royalties (which is usually % of the individual restaurants’ revenue). Therefore, for the restaurant franchise player it’s very important to look at the franchisees when analysing its business.

best,

Daniel

Answer 2

The franchise structure is a given in this case, which you need to accept. For this PE firm it is therefore relevant how much demand there will be for franchisees and what the potential profit on this is.