Surging KFC Valuations

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I am proud to tell you that KFC franchises are now selling for an all-time high. Valuations are surging, and many KFC franchisees don’t realize their companies are worth 30-40% more than just a few years ago.

New PH Buyers

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I’ve personally spent 12 months prospecting investors, family offices and operators for the Pizza Hut brand. On two recent Pizza Hut sell-side assignments, we’ve received 16 offers and 12 offers. This is easily the most I have seen in the brand in my career.

Private Equity Sellers

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For the private equity community, many groups want to sell their investments in a 5-7 year horizon. Some don’t have predefined timeframes. Most family offices are buy-and-hold investors but are opportunistic sellers when prices are high.

Taco Bell Valuations

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Taco Bell franchises are still selling near all-time highs. There have been a few headwinds, and pricing has moderated very slightly due to several reasons.

Great Time to Sell

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As I look at Unbridled Capital’s current deal flow of over 600 restaurants for sale, I think 2018 should be a great year for selling a restaurant company – much better than 2017.

Macroeconomic Update 2018

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After the go-go years of 2015 & 2016, 2017 was a mixed year for the franchise M&A community. I’m glad to give you some of my opinions on key trends and commentary for 2018 and beyond.

Finding a Growth Partner

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I have the pleasure of working with all sorts of people in the franchise industry, but perhaps my favorite is helping a mid-sized franchisee who wants to grow.

Let Us Refranchise

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I am a former Yum Brands executive, and we know how to work within the Corporate structure of a franchisor. We understand the thought-leadership, teamwork and process needed to build consensus and get things done.

Helping Franchisees Grow

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Unbridled has developed a profound love for supporting franchisees. We recognize that they are the life-blood of a successful franchisor. As the franchise world becomes more complex, franchisees need greater access to investment-banking expertise.

Overlooked Expenses in a Sale

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M&A transactions can be expensive if you aren’t prepared and don’t have an advocate working for you. I see mid-sized and smaller franchisees making big mistakes in not knowing what they don’t know – and thus costing themselves countless hours and unexpected costs in a sale.

Unbridled Beats Competition

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A large franchisee recently gave me three reasons why Unbridled is getting so much business – 1. We are the most responsive, 2. We are very effective while maintaining integrity and 3. We are more likable than our competitors.

Why Hire Unbridled?

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We are getting incredibly-high prices for our sell-side M&A clients in the sale of their companies. Most of the franchise companies we sell are achieving 5-10 or more offers on their businesses.

Valuations

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Knowing the value of your franchise business is a critical step in making the best decisions in terms of operating a business profitably, borrowing money, remodeling assets or participating in high prices paid by sophisticated buyers in the sale of franchise businesses in today’s M&A environment.

Selling A Company

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In the not too distant past, selling a restaurant company was often simple and quick. Over 15 years of experience, we have seen the process of selling a business become progressively more difficult, complex and time-consuming as the size and sophistication of the franchise industry has changed so dramatically.

Re-Franchising

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In recent years, most franchisors of legacy concepts owned 15-20% of their total locations. This was actually a reduction from the 90’s, when many franchisors were buying back franchises in order to increase their span of control and ownership at the corporate level.

Fast forward to the current environment today, and Wall Street and investors alike favor the asset-lite franchisor model.

QSR

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QSR has continued a steady pace of same store sales and traffic growth with certain legacy brands struggling with store closures, relevancy, poor assets and questionable operations.

The fast casual segment of the restaurant industry has been growing at the fastest clip, though they have a much smaller base than QSR and casual dining.

Casual dining has been languishing over the past few years, but there are some bright spots.

Private Equity

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In a low interest rate environment, where the riskless premium has essentially been zero for several years, investment funds have been increasingly shifting to owning private companies as a way to increase their return on investment and diversify risk. Now days, there are private equity companies deeply entrenched in almost all franchise brands.

P&L Management

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Standardization is very important. As you look at your Restaurant P&L’s, make sure you have a standard, well labeled methodology of knowing where all your expenses are. What P&L line items have the most areas of opportunity in your business?

Asset Actions

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Every franchisee has to deal with the eventuality of updating their assets. It is an essential part of running a successful business, and too often franchisees that deferred remodeling expenses for so long, saw their customers going elsewhere. Equally, some franchisors that are bloodthirsty for updating their assets do so on an inconsistent and sometimes unfair schedule.

Macroeconomic Overview

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In 2017, find out what our restaurant industry perspectives are and how they could affect franchisees from a lending and M&A perspective. Some things to consider: Will M&A pick-up? Are big tax changes headed our way? How strong is your store-level EBITDA?

EBITDA

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EBITDA is the key term, in the franchise industry, for evaluating the success of your business and the key driver to sourcing the best loan terms for your business. It is also a component in determining the value of your business. We’re going to give you EBITDA multiple ranges for 8-10 franchise brands in the current market place.

(NOTE) The information in this Video is for “informational purposes only” and Unbridled Capital disclaims any errors or omissions. Please talk to a CPA for any business decision.

Cap Rates

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A Cap rate is also known as a capitalization rate and is the rate of return on a real estate investment property based on the income the property is expected to generate. If you are a franchisee who owns real estate, you probably get 5-10 calls a week (or so it seems) from companies who seemingly specialize in sale-leasebacks. These companies are seeking to list your real estate for sale, attempting to sell it in a big pay-day for a lease to a future buyer.

Bank Financing

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Financing or refinancing a franchise loan is a very important and time-consuming process. What does this mean for a franchisee? If you have a brand that has performed well, it likely means that you will have multitudes of competition for your loans in this market. That’s the good news.
The bad news is that the administration, due diligence and ongoing servicing of these loans is at never-before-seen levels. If you have several loans, you almost need a full-time CFO.

Non-Restaurant Franchising

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In the last few years, industry insiders and private equity funds have been emphasizing that the future growth in franchising is outside of restaurants. They contend that restaurant competition is just too much – there is a new concept on every street corner, and organic industry growth is almost non-existent. In non-restaurant franchising, however, there appears to be several pockets of tremendous growth potential.