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Since its founding in 2014, Garnett Station Partners (GSP) has compounded at 33%[1]. The firm invests in the trillion-dollar franchise and consumer services industries and currently manages $2.3 billion. Matt Perelman and Alex Sloane started GSP as 26-year-olds, when they bought 23 Burger King restaurants. Over the past decade, they have made 26 other multi-unit investments, buying gyms, funeral homes, car washes, pet care services, and restaurant chains. 

Their firm is first quartile or better for net MOIC, IRR, and DPI against its peers[2], but the stat GSP’s founders are most proud of, Matt especially, is its loss ratio: sub 0.5%[3]. GSP has lost money only once, in its second platform company, MAACO, in 2015. 

“I think they’re the next generation,” legendary credit investor Marc Lasry said in a recent interview. 

Matt and Alex were fresh out of private equity, in the middle of an MBA at Harvard Business School, when they inadvertently started GSP by buying a Burger King franchise managed out of Garnett Street train station in Henderson, North Carolina. They wanted to buy a Quick Service Restaurant (QSR) for three reasons: 

  1. Trillion dollar TAM. Franchising is a huge part of the US economy. The wealthiest person in most towns is often the McDonald’s franchisee, the funeral director, the hotel owner, the local beer distributor, or the Ford dealer[4]. 
  2. Attractive supply/demand mismatch. There were 150,000 tier-one fast food franchises in the US[5], many owned by ‘mom and pops’ who were creeping up on retirement age. But the deal sizes were too small for institutional capital and franchisors have strict rules on who can become a franchisee, leaving a small pool of qualified buyers. 
  3. Margin expansion opportunity. The industry was mature, growing around 2% a year, but small operators had lower margins than larger, multi-unit franchise owners, suggesting there were opportunities in the middle of the P&L to make a difference. 

The MBA students planned to buy a small franchise for 3–6x EBITDA, improve it, use cash flow to bolt on additional units and sell the larger, consolidated franchise to an institutional private equity firm at 6–7x EBITDA. Matt and Alex had no designs to build a firm. They wanted to triple their money and return to their jobs at L Catterton and Apollo.