I’m invested in Jersey Mike’s in my Roth IRA.

Jersey Mike’s is a franchisor.

That means it collects royalties from thousands of independently owned restaurants.

Once the corporate infrastructure is built, the economics become incredibly powerful.

Every new location and every increase in same-store sales can produce disproportionately higher profits because the incremental revenue carries very high margins.

A few other reasons profits can jump so quickly after a private equity acquisition:

• Founder expenses often disappear. Things like personal travel, aircraft, excess overhead, and other discretionary spending frequently leave the P&L after an acquisition.

• Professional operators come in and improve technology, digital ordering, supply chain efficiency, and franchise support across the entire system.

• Experienced executives know how to accelerate expansion while improving the economics of the franchise network.

The ability to own investments like these inside a Roth IRA makes it that much more powerful.

After successful exits, including IPOs, the capital can be recycled into the next private equity investment, for tax-free compounding.