Hot M&A Market 2019

2018 was a great year for restaurant M&A. Investors, operators, family offices and private equity firms have continued to chase restaurant investments for growth. Watch here to find out more perspectives from Rick Ormsby at Unbridled Capital.

Brands in Demand

Some brands are more valuable than others, and the gap is widening. Watch here to find out which brands are the most valuable from Rick Ormsby at Unbridled Capital.

Valuation Metrics

Valuations are based on several key metrics, some of which include EBITDA, cap rates, G&A expenses and remodeling costs. Find out how they inter-relate by watching Rick Ormsby’s views from Unbridled Capital.

M&A Deal Obstacles

M&A transactions have their ups and downs – financing contingencies, franchisor approval and egos are just a few factors that affect a successful sale. Watch Unbridled Capital’s viewpoints here from Rick Ormsby.

Buying Corporate Stores

There are inherent plusses and minuses of acquiring a restaurant business from a franchisor versus a franchisee. Which is the best route to take for an M&A transaction? Watch Unbridled Capital’s insights here from Rick Ormsby.

Brands with Red Flags

Some franchisee turnover is to be expected, but there are definite inflection points when increased M&A occurs in the lifecycle of any brand. Know the red flags by watching Unbridled Capital’s insights here from Rick Ormsby.

Family Office Financing

Family-offices have a certain playbook when acquiring franchise companies, which is somewhat different than legacy operators of the past. Watch here to find out Rick Ormsby’s views on how family-offices are changing restaurant financing at Unbridled Capital.

Financing Trends 2019

Easier lending requirements, bifurcation of loans and the trendy Term Loan B financing for larger operators – these are new financing trends. Watch Unbridled Capital’s financing insights here from Rick Ormsby.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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?

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.

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?

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.

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.

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.

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.

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.