Early Growth Capital For Emerging Franchisees

Facilitator: Ellen Hui, Managing Director M&A, National Franchise Sales

Panelists:Mike Record, SVP/Manager of Program Finance, Restaurant Finance Group

Angelo Crowell, CEO, Kalo Restaurant GroupKimberly Crowell, President, Kalo Restaurant Group

Franchisee Borrowing Lifecycle

DisadvantagesAdvantagesBorrowing Source

Personal Cash

Friends/Family/3rd Party

SBA

Equipment Finance Companies

Sale Leaseback/Build-to-Suit

Local/Regional/National Bank Generalists

Restaurant Finance Verticals

Sub-Debt/Preferred Equity/2nd Lien

Fast; flexible; easy

Access to capital

Moderate equity requirements; available for startups

Low equity requirements; available for smaller operators

No equity requirements; can finance LB&E together

Low cost of borrowing; readily available capital

Industry expertise; low cost of borrowing

Growth acceleration

Ties up capital

Can be costly; ownership dilution; can limit future borrowing ability

Time consuming; excess collateral; higher debt costs

No start-ups; higher borrowing costs; no RE or BV

Not available for smaller operators; can be expensive; gives up RE ownership

No start-ups; banks are restaurant-averse; lack of industry expertise

No start-ups; lending to larger established concepts

Costly; larger operators only; ownership dilution