Food for Thought: Franchise ABS Keeps Relative Value On the Menu
April 9, 2026
Franchise (also known as “whole business”) asset-backed securities (ABS) have become a growing share of the ABS market in recent years, with $13.5 billion and $11.0 billion issued in 2024 and 2025, respectively, up from approximately $2.3 billion in 2023.1 New issuance volume reached $2.4 billion in the first quarter of 2026 across four deals, on pace to reach close to $10 billion on an annualized basis.2 This year’s roster also featured an inaugural issuer, Oncourse Home Solutions, demonstrating a growing trend for highly franchised brands to tap this source of financing in lieu of, or in addition to, traditional corporate debt markets. Collateral for these transactions typically includes franchise revenues (issuers tend to operate the majority of their stores under franchise agreements and may include domestic and international locations) and other contractual streams of cash flows. Investors look for these transactions to de-lever naturally through sales growth, given franchise fees are typically paid as a percentage of revenue, and unit count growth, where increased systemwide revenues provide additional collateral for the ABS trust.
Today’s Chart of the Week highlights that new-issue franchise ABS deals, which usually carry a BBB+, BBB or BBB- rating and issued primarily in 5- and 7-year terms, can offer outsized returns relative to the BBB corporate debt index for similar-tenor debt. Much of this pick-up is likely explained by differences in volume and liquidity between the two markets. In March alone, $235.6 billion of investment-grade corporate bonds were issued in the U.S. versus $715.0 million for franchised ABS.3,4 For investors comfortable with this dynamic, whole business transactions also offer the unique opportunity to invest in well-known brands that may be privately owned, such as Subway and Dunkin’ Donuts which are both owned by private equity firm Roark Capital. These structures can also provide selective access to certain franchises in publicly traded companies, such as Taco Bell which is owned by public Yum! Brands alongside KFC and Pizza Hut but excluded from the Taco Bell ABS trust.
Interest in high-quality household brands extends beyond the securitized markets. In recent months, acquisition activity in franchised names has been healthy, highlighted by Blackstone’s purchase of Jersey Mike’s in 2025 and KKR’s reported acquisition of Nothing Bundt Cakes last month—both brands are active issuers in the whole business ABS market.5,6 As transaction activity persists, additional issuance from repeat borrowers or new issuers may bolster deal volume for franchise ABS.
Key Takeaway
As volume and issuer involvement expand within the franchise ABS market, investors may find relative value compared to similarly rated, unsecured traditional corporate bond debt. Trading volume and liquidity needs should be properly considered, though may be tempered as the market evolves in the medium-to-long term.
Sources:
1,2,4DB Research
3SIFMA – US Corporate Bonds Statistics; 4/1/26
5Virginia Business – Blackstone completes Jersey Mike’s Subs acquisition; 3/13/25
6Reuters – KKR to acquire Nothing Bundt Cakes for over $2 billion, source says; 3/25/26
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