June, 2013

Direct Lending Platform to “Quick Service Restaurant” Industry

After the recession of 2008-2009, lending for the purchase of franchise restaurant businesses became extremely restrictive. Low loan-to-value and bigger dollar deals were getting done, but smaller deals and higher loan-to-value (65%) deals were not. For private lenders with expertise in this space, this presented a significant opportunity to finance multi-unit franchise purchases with experienced operators and with senior secured loans at very attractive rates.

We identified a private lending group with a platform to finance the acquisition of multi-unit franchise restaurants. This group has been in the business since 2005 and has completed over 100 transactions with an exemplary track record. Their strategy was to make 3-5 year fully amortizing senior loans to experienced operators of multi-unit restaurants of established brands like Pizza Hut, Denny’s, Burger King, and Wendy’s, in some cases with preferred equity kickers. To date the loan portfolio has produced annual distributable cash yield of 11%- 12% with expected total returns of 13-16% IRR.