"The volatility in financial markets was driven by a number of economic events, including a deteriorating housing market, a credit crunch, a weakening job market, record high oil prices, record low dollar exchange rates, and sinking consumer confidence. 36 of the 50 components of the RCF 50 Index lost market value this quarter," said Senior Research Fellow Hachemi Aliouche.
The RCF 50 Index was developed by the William Rosenberg Center of International Franchising at the University of New Hampshire Whittemore School of Business and Economics. It tracks the market performance of a portfolio of 50 U.S. public franchise companies that are representative of the U.S. business format franchising sector.
The Rosenberg Center Franchise 50 Index is up 92% since January 2000, while the S&P 500 is up 9.5% over the same period. The index tracks the market performance of the top 50 U.S. public franchisors.
During the third quarter, Hilton Hotels Corp. (HLT) was acquired by Blackstone Group LLC for $47.50 a share, which drove Hilton's stock price up sharply. Hilton gained 39% in market value by the end of the quarter, and its acquisition will make Blackstone the largest hotel operator in the world.
Doughnut maker Krispy Kreme (KKD) reported worse-than-expected financial results in early September, and its stock price plunged 38% in one day. Declining sales and high impairment charges and lease termination costs led to a net loss of $27 million, a much higher loss than the $4.6 million loss the previous year. It finished the quarter with a 57% loss of market value, making it the worst performer of the index.
This quarter saw a number of sales of franchise companies, including two components of the Rosenberg Franchise 50 Index. ServiceMaster International was acquired in July by an investment group led by private equity firm Clayton, Dubilier & Rice Inc. for $15.625 per share in cash in a transaction valued at $5.5 billion. Option Care Inc. was bought in early September by Walgreen Co., the largest drugstore chain in the United States, for $19.50 a share and for a transaction value of $850 million.
"These [franchise sales] come on the heels of the acquisitions during the second quarter 2007 of RCF 50 Index components Realogy Inc., Outback Steakhouse Inc., and Bandag Inc. by private equity firms Apollo Management, Bain Capital, and Bridgestone Americas, respectively. RCF 50 Index components Hilton Hotels Corp, Wendy's International, and Applebee's International are currently in the process of being sold," Aliouche said.
