Welcome to The Business Buying Academy with Sieva Kozinsky.

🔑How to Franchise the Right Way

If you're reading this newsletter, you either own a business (maybe several), or you want to own one.

And you've probably considered franchising at some point.

Franchising can be wonderful. It can also be a disaster.

Connor Groce has seen both outcomes up close, and lived to tell about it.

If you’d like his help identifying, evaluating, and funding the right franchise for you, schedule a free intro call with him.

Connor has owned and operated franchise units in multiple systems. He has grown his own portfolio through successful acquisitions and is one of the leading voices at the intersection of ETA and Franchising.

He also publishes a weekly newsletter called "Franchise Gateway" and serves as the franchising contributor for Acquiring Minds (one of my favorite podcasts)

If there's anyone you're going to learn the franchise business from, it needs to be Connor.

Thanks to Connor for sponsoring today's newsletter.

🔑 He Founded GM and Chevrolet - and then combined them

In 1918, the American automobile industry was on the verge of explosive growth.

World War I just ended.

Years of pent-up customer demand was about to be released.

But the sector was still young and highly fragmented (the Ford Model T was only introduced 10 years earlier).

Hundreds of manufacturers entered the market over the previous few years in the rush to grab a share of the emerging industry.

The exploding industry offered a unique opportunity for consolidation- and one man built that opportunity into an empire.

The state of the Automobile Industry

If you think of the early days of the automobile business, you probably think of Henry Ford.

But there's another name you should know (we'll get to him soon).

But in the mid 1910s, Ford dominated the low-price segment with Model T, while other companies operated as assemblers, heavily dependent on independent suppliers for critical components such as electrical systems, bearings, and starters.

This reliance created chronic challenges around cost control, quality, and supply-chain reliability.

General Motors, which already owned several premium brands including Buick, Cadillac, and Oldsmobile, recognized a major opportunity.

In 1918 GM executed one of the most important car mergers of the era: the acquisition of United Motors Corporation for approximately $45 million (roughly $1 billion in today’s dollars).

United Motors was leading auto-parts supplier company at the time.

In the same year, GM also consolidated Chevrolet Motor Company through a clever reverse merger that was revolutionary for its time.

These two deals were textbook horizontal and vertical roll-ups that transformed GM from a loose collection of car brands into a more fully integrated manufacturing powerhouse.

The deals delivered immediate scale, secured critical supply chains, and laid the foundation for GM’s dominance in the 1920s.

The Key Man at GM & Chevrolet

Billy Durant was the visionary entrepreneur who founded General Motors in 1908 by consolidating several early auto companies, including Buick.

He was forced out of GM management in 1910 due to overexpansion and financial strain - but he quickly built Chevrolet into a high-volume, mass-market success to compete with GM.

In 1918, he used Chevrolet as the vehicle for his comeback: he engineered the reverse merger that brought Chevrolet into GM, swapping Chevrolet stock for GM shares in a deal that restored his control.

The Deals

1. Chevrolet Reverse Merger (May 2, 1918)​
   GM offered its own shareholders five shares of Chevrolet stock for every one share of GM stock they held in an innvoative reverse-merger. Chevrolet, was a fast-growing brand - GM integrated it into the company as a major division alongside its existing premium brands like Buick and Cadillac.
   ​
2. United Motors Acquisition (late 1918)​
   GM purchased United Motors for ~$45 million, paid primarily in a mix of GM debentures and common stock.

GM’s 1918 figures show the early impact of integration:

• Net sales (excluding sales of newly acquired companies prior to purchase): $269.8 million
• Total net sales (including post-acquisition contributions): $326.0 million
• Net manufacturing profits (after depreciation): $35.5 million

Post-Acquisition Performance: Explosive Growth

By 1919, the full-year benefits were clear:

• Net sales: $509.7 million (56% increase from 1918)
• Net profits: $90.5 million (more than 2.5× the 1918 manufacturing profit level)
• Units sold: 406,158 (up 64.5% from 246,834 from 1918)

With these two deals, GM created the blueprint for the modern automobile company:

Own the entire supply chain and horizontally integrate to offer every type of car a consumer might want.

Sieva

P.S. - Are you hiring? Get started with top global talent from Somewhere (I'm a customer and investor)

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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