Beyond the Arches #3: How Patrick Mahomes became a football & franchising MVP

Featured Story

Patrick Mahomes: MVP of football & franchising

2022 was a banner year for Patrick Mahomes. Not only did the superstar quarterback lead the Kansas City Chiefs to a nail-biting 38-35 victory over the Philadelphia Eagles in the Superbowl on a busted ankle, but he also closed the season as MVP and the league leader for passing yards and touchdowns.

It should come as no surprise then that the two-time Superbowl champ is also setting himself for big wins off the field. In June, Mahomes, a Texas native, entered into an agreement with the iconic Texas brand Whataburger to open 30 new locations across southern Kansas and Missouri. 

So how much could Mahomes actually make from this deal? Let’s run some numbers.

(One quick note: Because Whataburger has not made its financial disclosure document public, we’ve calculated annual sales per location based on revenue and location data from the Franchise Times. The initial investment data was crowdsourced from various publications.)

The initial investment for a Whataburger franchise is somewhere between $1.2 million and $2 million per location, and each of these locations makes an average of around $3.2 million in sales per year. Let’s assume Mahomes buys in around the midpoint of this range, say $1.6 million. He stands to invest up to $48 million total, so given a 15% profit margin, it would take between 2.5 and 5 years for him to make back his investment. After that, he could pocket as much as $19 million a year from his investment, completely passively.

Let’s also consider what would happen if Mahomes wanted to sell his units down the line. Based on info from DealStats, the selling price for this size acquisition would range from 0.85% to 0.95% of sales. Assuming the average revenue of the acquired locations is in line with the rest of Whataburger’s US-based locations, the acquisition price would likely be anywhere from $81.5 million to $91.1 million.

Now that’s what we’d call a SUPER way to build generational wealth.

Franchise News

• The RFIC 50 rose 11.9% in Q4 2022, outperforming the S&P 500 Index and signaling robust recovery in the franchise sector despite continuing economic challenges from inflation.
• Big Chicken, the chicken sandwich brand founded by Shaquille O’Neal, is teaming up with Blue Origin to inspire students’ love for STEM with a “Postcards to Space” program. Patrons at Big Chicken restaurants will be able to draw their vision for the future on postcards that will be flown to space on one of Blue Origin’s future New Shepherd missions.
• After weeks of rumors, Subway officially confirmed that it is in the process of considering a sale of the company. However, there are no details available as to when a sale would occur, if at all.

Deal Flow

• Five units of the Twin Peaks sports bar franchise in Kansas City and Wichita have been acquired by newly-formed franchisee group 3B Lodge. 
• Seidler Equity Partners has purchased embattled franchisor Unleashed Brands from its private equity backers. Unleashed Brands manages franchises focused on kids ages 3 months to 18 years, and currently faces a barrage of lawsuits from franchisees from two of their five brands. 
• Gregg Majewski, the former CEO of sandwich chain Jimmy John’s, has launched Craveworthy Brands as an umbrella company to manage four restaurant brands: Wing It On, The Budlong, Krafted Burger Bar + Tap, and Lucky Cat Poke Company.

Macro Trends

• Waves of layoffs continue to ripple across the tech world, with a fresh surge at Alphabet’s self-driving subsidiary Waymo. As displaced talent seeks new places to land, other industries could potentially benefit from their experience.
• Retail sales rose 3% in January even as inflation continues to put pressure on consumers, signaling that economic activity overall may be on the rebound after a slow period at the end of 2022.
• Russia announced it will be reducing oil production by about 5% in response to sanctions imposed on the country by Western governments. Markets will be watching closely as this drop in supply, in tandem with China reopening after COVID lockdown, could mean a spike in prices.
• The Consumer Price Index came in slightly hotter than projected and Producer Price Index saw its highest month-to-month gain in six months, signaling stubborn inflation and potential future rate hikes by the Fed.