Aziz Hashim ‘Humbled’ as NRD Closes Second Franchise Fund
NRD Capital Management completed fundraising for NRDP II, the second fund under storied multi-unit franchisee Aziz Hashim.
Hashim, who founded NRD in 1996 and grew it to a successful multi-unit QSR operation then expanded in PetValu before getting into the fund business, said it will be a fitting sequel to the initial fund. Like the first fund, capital in NRDP II will go toward emerging franchises that need help getting to the next level.
“We demonstrate that if you do things right, quality franchisees come to the table and then you can really have some nice growth. But the point is getting in early enough so that the brands aren’t so far gone that you can’t really do anything with them, but they’re not too new—it’s beyond proof of concept,” said Hashim.
He said the investment in Fuzzy's is one example of what the fund is capable of.
“Just 12 months after our ownership, Technomic reports that it’s the fastest growing fast-casual Mexican brand in America. That stuff is not coincidental,” said Hashim.
The second fund will have a slightly different mix compared to fund one, Hashim is giving some attention to emerging healthcare franchises. He said 15% to 20% of the fund will be dedicated to healthcare franchises with the rest going toward the same kinds of deals seen in the initial fund. NRD added some new personnel will help with that focus.
The fundraising was completed fast. Since November of 2016, the fund surpassed the goal of $100 million. In fact, according to an SEC filling, it surpassed the halfway mark just 15 days after the fund opened to investors.
Hashim said that was due to happy investors from the initial fund, 91% of limited partners (LPs) came back for round two. The fund also attracted 30-40 new investors.
“The story is in roman numerals in the fund business, the first one is all your credibility. The second one is all performance,” said Hashim. “The reason they came along is because they made a bunch of money on fund one. Our approach works.”
Just how much investors made will be announced in the coming months, but judging by the influx of those initial investors, the disruptive franchise-focused fund structure is largely proven.
“If you look at all the ways we’re different, we’re operations focused, we’re unit-economics focused, then we have a bunch of LPs our investors are mostly multi-unit franchisees so we’re sensitive to their needs as well,” said Hashim. “So in many ways we’re different form the typical PE fund, we see ourselves disrupting private equity.”
He said he’ll be investing the money fast, in fact the pipeline of deals never really stopped since the first fund so investors will see their capital invested immediately. Funds like this are designed to be invested over five years, but Hashim doubts it will take two years given the pipeline of deals and the eagerness of investors.
There’s no word on fund three yet, but this won’t be the last from NRD, Hashim prefers limited funds for a few reasons. First, it means no dry powder wasted on mediocre deals. And second, the nature of his investors calls for the unique approach.
“Our investors are multi-unit franchisees,” said Hashim. “These are not people sitting on excess cash, so the nature of our fund is that we can always go back to the well, I prefer to do that. I prefer to raise what I can in a reasonable amount of time and then to back, and that works.”
He said it’s designed that way because it’s built for people like him and he has a deep desire to get it right.
“I feel a great responsibility because the type of investors I have are not endowments, pension funds or insurance companies, these are people that have come from nothing for the most part and they’re promising me millions of dollars of their hard earned money,” said Hashim. “I’m one of them, my investors look just like me. So I know what it took for those guys to make the money, so to trust me with it is a huge sign of respect and I am very humbled by it. So I hope we can continue to get extraordinary returns for them and the franchises that we buy.”