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Unbridled Capital

New PH Buyers

Video

04.02.2019

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.

I love Pizza Hut. I love Pizza Hut franchisees. I love the brand, I love the product and I love the history. Over 15 years ago, I worked for YUM! Brands Corporate. Since then, I've staked my livelihood on helping Pizza Hut franchisees in the sale or financing of their businesses. This includes assignments with over 20% of the Pizza Hut system and the sale of hundreds of Huts for franchisees. Despite recent rocky financial performance, I'm proud to tell you that Pizza Hut franchises are now selling for an all-time high, valuations are surging and many franchisees don't realize their companies are worth much more than just last year.

Let me give you some valuable points to consider. From my professional perspective, I believe that it is a fantastic time to sell your Pizza Huts. On two recent Pizza Hut sale site assignments, we've received 16 offers and 12 offers from qualified buyers. This is easily the most I've seen in the brand in my career. Pricing is at or exceeding five and a half times EBITDA, up to six times EBITDA for premium businesses after three and a half percent G&A and near term remodeling discounts. Dine in real estate valuations are at roughly seven percent implied rents and at seven and a quarter percent cap rates.

We know 10 to 15 groups from outside the system that are aggressive Pizza Hut buyers for any deal with at least 15 to 20 units. You might ask how we are getting such high valuations, there's a few reasons. The first of which is prospecting and sales. I personally spent 12 months prospecting investors, family offices, and operators for the Pizza Hut brand. The Pizza Hut system needed new blood.

Another reason is the turnaround story. We point to the impressive turnaround at KFC as an example of Yum!'s commitment to Pizza Hut's future. A third reason is scalability, and this is a big deal. The large size of the average Pizza Hut franchisee is unique in the QSR industry.

A fourth reason is G&A and unit count. New groups want significant above store G&A to hire a seasoned operator and team. You can't get a high amount of G&A in another brand unless you spend much more money. Most groups are headed by young executives with investment banking and PE experience. They don't want to be operators.

And fifth is reasonable pricing. Pizza Hut valuations are lower than Taco Bell, Dunkin' Donuts, Wendy's, Panera, Burger King and other brands. Pricing looks reasonable relative to other QSR alternatives.

All of this is great news, with a forewarning that deals are becoming much more complex. You'll need help to get the price, and a bunch of it. Our Pizza Hut clients are getting millions of dollars of extra value from hiring us. Most franchisees also underestimate the amount of time it takes to sell a business and the high hidden fees and costs.

Unbridled's involvement saves bundles of time and money. It's one of the best return on investment decisions you've ever make. Ask to see the sophistication of our financial modeling and the comprehensiveness of our due diligence process or the analytical and legal skills of our staff. There is a sizable difference between Unbridled and others, and this translates to higher prices and better deal terms for our clients.

If extreme confidentiality is a concern, we are happy to design a narrow and very quiet sales process if you don't want a loud blast to the world. For this reason, most of our deal flow does not go to the open market anymore.

Finally, we specialize in joining franchisees with private equity or family office money. This is becoming attractive for operators wanting to grow. Ask us to tell you about it.

At Unbridled Capital, we currently have over 300 Pizza Hut restaurants for sale, and I expect this number to grow. We are quickly and quietly becoming one of the largest franchise investment banking firms in the country. It's a blessing. Please feel free to reach out any time. We'd be happy to talk valuations, timing and expectations in the sale or financing of your Pizza Hut business.