While stuck in traffic on my way home on Friday, I listened to this excellent interview of Joel Peterson on Think Like an Owner, one of the best entrepreneurship-through-acquisition (ETA) podcasts out there. I had the privilege of having dinner last year with Alex Bridgeman, who runs the podcast – he’s a super inquisitive guy who is going places.

For those who don’t know, Joel Peterson is the former CEO of a large real estate firm, a much-loved Stanford GSB professor, the founder of PE / VC / ETA investing firm Peterson Partners. He’s also the chairman and an early investor in my favorite airline, JetBlue. His current class at Stanford GSB is titled “Engineering a Remarkable Life” and I’d listen to what Peterson has to say on the topic. One thing that stood out for me on the podcast was the balance between planning and serendipity in designing a remarkable life – interpreted as the intentionality to put yourself in the right room and the flexibility to run with whatever happens in the room.

This reminded me of another podcast I listened to earlier in the year which featured a GSB alum, especially as his company was recently in the news. Greg Flynn founded what has become Flynn Group as a young Stanford GSB graduate in the late 1990s. Today, Flynn Group is one of the largest franchisee organizations in the world, but 25 years ago, Greg was doing some real estate investing and helping open a new market for a classmate’s restaurant startup that he was also an investor in. Flynn’s story is one of the most impressive ETA stories out there, but it’s rarely discussed in the “traditional search fund” circles. Flynn saw what was a then-strong trend in casual dining growth and got into franchising through buying a few Applebee’s locations (combining real estate and restaurants), and now has $4.5 billion in annual revenue and 75,000 employees across over 2,500 locations and brands like Taco Bell, Panera, Pizza Hut, Wendy’s, and Arby’s.

There’s a few obvious reasons for that, in my mind:

1. Flynn didn’t raise capital from the search fund ecosystem. That said, that community barely existed 25 years ago – Asurion was acquired by Kevin Taweel and Jim Ellis only a few years before Flynn got started, funds like Pacific Lake and Peterson Partners didn’t exist, etc.
2. Most of Flynn’s businesses betray the core traditional search fund criteria – they serve consumers directly, are operationally complex, and don’t have recurring revenue.

To be clear, I don’t think either of these things should disqualify Flynn from being considered one of the most successful search fund acquisitions of all-time – and it illustrates an important tenet of entrepreneurship which is discussed but maybe not fully believed within traditional search fund circles – there isn’t one “right way” to build a business! Acquisition criteria should absolutely exist, but they should also be consistently interrogated and not just followed blindly.

Also, #2 was true until a few weeks ago, which takes me to why I was thinking about Flynn recently. Going back to my consumer private equity days, I was a pretty strong evangelist of the Planet Fitness system as a great opportunity for private equity. I knew at the time that the Flynn organization had a similar view, as we competed directly for a couple opportunities (and I can relate to being an inch away from entering the space as COVID hit!). I don’t think the recurring revenue from gym memberships will change Flynn’s spot in search fund lore, but I do think the most recent acquisition, along with the multi-decade shift in the portfolio from casual dining to QSR, fast casual, limited service hotels, shows how serendipity can happen when you’ve put yourself in the right room. Flynn no doubt is a buyer of choice for virtually any franchisor (as long as they aren’t already involved with a competing concept) – they’ve shown they can build great cultures and execute at scale, and learning how to do that is way more complex than learning the nuances of any given brand and their operations. If I were a franchisor in an sector that Flynn didn’t yet operate (auto services, C-stores, etc.) I know who I would be calling if I wanted to 1) see consolidation within my franchisee base or 2) transition a large block of locations to a new owner.

Also – if someone wants me to write a case study of Flynn for the HBS ETA class, I won’t say no!