Franchise Value
Operating Executives
Case Study
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Within each industry of interest, Arlington seeks to invest in companies with Franchise Value – those substantial and differentiating characteristics that create strategic value and the opportunity to build industry-leading companies with strong growth and profit margins. These embedded characteristics may include:
- High barriers-to-entry or substitution
- Deeply rooted customer relationships
- Distribution capabilities that are difficult to replicate
- Regulatory protection
- Defensible or enduring cost structure advantage
- Proprietary technology or unique processes
Arlington believes that companies possessing Franchise Value are most likely to become market leaders and earn superior returns on invested capital. Companies that possess an efficient cost structure have greater pricing flexibility and, thus, an ability to withstand market share threats. Franchise Value is quantitatively demonstrated by a company’s ability to achieve at or near market leading financial margins in comparison to its relative peer group. Arlington has consistently focused on its portfolio companies’ ability to achieve superior financial results to capture the value unlocked by such a performance enhancement.
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