Season 3 Episode 4. Franchise Times Dealmaker of the Year Awards, Q1 Reflections, Q2 Projections, and the Current Franchise M&A Market



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Well, hey, I'm excited to be here with you guys today and we've got a lot to talk about. In my mind, it's been a crazy last couple of months. Here we sit in the spring of 2021, and we continue to unravel this new way of buying and selling franchise businesses during a pandemic. Sales and profits have taken these crazy turns, in most cases for the positive. And so, everything has been changing and evolving pretty quickly in terms of prices, multiples, buyers, stimulus, and all this stuff.

I want to talk about all of that and we just chat about that for the next 30 or so minutes. But first, I wanted to give a shout-out to our Unbridled Capital team. How cool is this? Franchise Times is, as you all know, a magazine and a marketing company that puts out tons of franchise information and deal information. They come out every year with the Franchise Dealmaker of the Year Award winners.

In 2021, it came out I think in February, which at this point's about a month, month and a half ago. They came out with 11 Dealmaker of the Year award winners in 2021, okay? So bear with me for a minute. There were only three awards given to restaurant franchisee deals, of the 11 total awards that were awarded. Guess what? Unbridled Capital, was working on every one of those three transactions, and we were noted in those deals. I mean, how cool is that? So we're a three X winner of the Dealmaker of the Year award for Franchise Times. Someone at Franchise Times told me they thought that was surely a record. And I'm just honored and blessed that our team's done such a great job, man. I mean, how cool is that, right?

The first deal that was recorded here was Quality Restaurant Group, which was backed by GenRock Capital Management by 62 stores from MVP Sonic and five more acquisitions with a value of more than $150 million. This particular transaction was in the Sonic system. So GenRock got into the Sonic brand in a big way by buying MVP Sonic. And so, that was a great landmark platform transaction that Unbridled was a sell-side representative on. It was a great transaction, so that was a big deal back in 2020.

And then, here's another one. Restaurant Brands New Zealand buys the assets of Great American Chicken, the primary KFC franchisee in the Los Angeles area with 70 restaurants. Of course, we were, in this case, the buy-side advisor. Unbridled Capital was. It was a big landmark transaction, bringing a publicly traded company that represented over 300 restaurants and owns over 300 restaurants in New Zealand and Australia primarily, but also in the Hawaiian islands.

There are KFC, Pizza Hut, and Taco Bell. I think they own maybe some licenses with Starbucks and with Carl's Jr. as well overseas. They came to the US to get what they consider to be a beachhead, which they call, acquisition in the Western United States. And so, it was a pretty exciting and unique deal that we advised on, on the buy-side. Real thankful to be honored by Franchise Times for that one.

Then the third one was that Unbridled Capital rolls up four sellers to sell 67 Moe's Southwest Grill Stores to Quality Restaurant Group, making Quality the largest Moe's franchisee. How neat is that? I don't know if any of you who have done deals a lot, how hard it is to have two transactions from two different sellers close simultaneously. But in this particular situation, our team gathered together four franchisees, and four sellers, totaling 67 stores, in the Moe's system and sold all four of them simultaneously to one buying franchisee, Quality Restaurant Group.

I mean, what a cool deal that is. That's almost unheard of. I've been doing this for over 20 years now, and I've never done a deal prior to this that even had three sellers at one time, let alone four. So kudos to Derek Ball on our team, for helping execute these assignments. Just really great work. I'll say that we'll probably do, sometime in the future, a podcast. It'll dig a little deeper into each one of these three transactions so that those of you who are listening can hear the meat and potatoes of what happened on those transactions, what the timeline was like getting through COVID, what the sales look like, who the buyers and sellers were and how the negotiations went. So stay tuned later in the year and we'll do that.

In the meantime, you can check out the awards on Franchise Times, and there's going to be some more information coming out through a couple of webinars and podcasts with Franchise Times on these particular deals in the next couple of months, I believe. As I sit back and go back to our initial reason for starting this webinar and talking about what's happened in the past 60 days as we end and push into Q2 and end Q1 of 2021, I'm amazed by the impact of the stimulus checks that have gone out under the new Biden administration and their impact on especially QSR sales and transactions.

I mean, we've got a lot of clients who are just absolutely killing it right now over last year. Of course, they're going to be lapping some really soft comps. I mean, we all remember, what day did it really happen? In my mind, I think COVID hit on March 12th or March 13th, one of those two dates. I was down in Dallas and I can remember being at a convention. Everyone was leaving and people canceled at the last minute, and it felt like a ghost town there. That seemed to be just right at the start of it for me.

Sales in all brands struggled for at least a 30 to 60-day period. But of course, we've talked about this before. The QSR space has just been really, really resilient and they started coming back, certain brands faster and more strongly than others, starting in the very, very late part of April, early part of May, and then pushing out into the summer. You had an uneven performance, sometimes the delivery mechanism of stores like Sonic, where you had touchless, contactless delivery of the food to the cars, where really that model just really started doing really well.

Heavy delivery businesses started doing really well. And then, obviously, the casual diners and the fast-casual locations without drive-throughs went on really a run of struggling. They've mostly recovered. At least the fast casuals have. The stimulus spending has really pumped sales and transactions. Starting in the latter part of March, we're starting to hear a lot of our clients up 60 and 70% in sales on a comp basis, on a day over day, week over week, period over period basis. The numbers are absolutely incredible.

This is in many cases still with drive-throughs, only in some locations and dining rooms either not open or partially open. It's creating what amounts to, in my mind, something that we haven't seen in this industry in forever. I mean, the franchise industry is in the restaurant side, at least on the QSR side, and is starting to look like the dag-gone tech stocks from the late '90s. I've never seen such increases in sales and profits in an industry and a business that grows by one or 2% a year.

And so, this is really just an unprecedented time and we continue to hear our operators who are friends of mine and obviously large franchisees, they're just quietly amazed at how much money they're making at the moment, number one. The second thing is, I can hear in their voices how much they're struggling with keeping up with labor. Everyone is just like it's all hands on deck and people are working overtime and hours are longer.

It's just hard to staff all the growth that's happening in this business right now, not knowing whether it's going to be long-term, short-term, or medium-term, or how it's going to all play out throughout the summer and into the early fall. So those are some good trends that are happening in our business. I would say right now, at the moment, if I just looked at our crystal ball, Unbridled Capital has a bunch of deals. We've got probably 30 deals roughly that we're into over nine brands. I just counted them up before I started this podcast.

So we're working on nine brands right now. I think that the activity of deals is probably double what it normally is. We're seeing three or four reasons why that's happening. There seems to be, if I look at M&A in our business, I look at supply and demand, a simple concept we all learned in economics. It's about how many buyers you have and how many sellers you have at a certain price. And it makes up the market.

There are a lot of reasons why selling for a franchisee is appealing right now. Therefore, the activity that we're seeing is up two or three-fold from what it normally would be. However, you would say in a normal time, with that amount of supply, the demand would drop. Like there are only so many buyers out there, and if the transactions are doubling or tripling, then there must be fewer buyers per deal, and there must be downward pricing on the transactions. And that's absolutely not happening.

So I think there's also an influx of buyers, and buying is a good idea for these buyers right now too. I feel like there's still an equilibrium. If not, maybe feels like there's an upward pressure on pricing. Let me give you some things that are going through the minds of some of these buyers and sellers. For buyers, it's been the same kind of deal. I mean, even though we've had a little bit of an up... Interest rates have come up just a little bit, we're still in a really low interest-rate environment.

Banks have continued to ease up on their lending requirements. Maybe not on their lease-adjusted leverage, in their coverage ratios, and things like this so much. It's just maybe their willingness to open their pocketbooks again and win money on franchise deals. Some of them are actually quite a bit more aggressive than they've been in the last three or four months. A lot of it's because the rollover comps and the trajectory of these businesses are strong. So you have that. Capital is easier to find and interest rates remain low. That's a good thing for buyers.

The second thing I think is happening is, again, we've talked about this in the past. But you have this Amazon-ing of the retail space that hasn't happened to restaurants. Because of that, it feels like this area is an area that's attracting more capital maybe than other areas. It's like more people are buying houses in Florida now than they are in New York. Maybe it's shifting across these segments. People want access to the service sector and they want to be able to invest in the retail sector. And these fragmented businesses, privately held franchise businesses are ways to do that in a meaningful way.

We have a redeployment of capital. I think that's it, into this sector, from people, family offices, private equity groups that are getting into the space. And then, frankly, I think you have a lot of people, maybe a lot of big franchise groups that own existing units who are sitting on stronger balance sheets from all the PPP funds and from honestly the coffers of money that have started to accumulate from some of their recent and strong performance since, at this point, in many cases, since the middle of Q2 of last year.

Most franchisees in the QSR space, in certain brands, not all brands, but in certain brands are sitting on more money than they've ever had. I mean, it's not even close. They were sitting on so much money, in many cases. And so, at some point in time, if you're a wealthy franchisee and you own 150 locations, I mean, I know a lot of these guys and girls, and what do they start thinking? They start saying, "Well, dag-gone it, depreciation's my best friend and I need more of it because I don't want to pay taxes."

So what do they immediately look to do? They look to develop stores again when they can, or they look to acquire so they can have more depreciation and they can keep the cash flow engine going. They have so much borrowing capacity and so much less debt than they had in the past. It's not that big of a deal to tack on another 20 or 30 or 40 restaurants or franchises to the portfolio. So I know that's happening too, people wanting to invest.

Some of it I'm sure is the fact that we had such appreciation in real estate and we've had so much appreciation in the stock market too. Maybe, comparatively, even though we're in a slightly increasing EBITDA multiple environments right now, maybe the appreciation on just a multiple of EBITDA and cap rate basis has been less than it has been in some of the other industries that folks are looking at.

Maybe that's a decent segue to what has happened in the past 60 days, so EBITDA multiples and cap rates and the metrics that we use in this space to price these franchise assets that people want to buy and sell and finance. I mean, I would say that EBITDA multiples are again on a mild upward trajectory. It is true, historically, that most deals, franchisee deals, trade between like four times EBITDA and nine times EBITDA.

I know that's a huge swing because that's like a 225% difference between the low and the high end. It's typical probably that most decent size restaurant franchise businesses in the QSR world trade normally between a five and six times EBITDA multiple. I would say, in this market, that multiple had the perspectives 60 to 90 days ago, that the multiples had come down a little bit, but because the performance was stronger on a year-over-year trailing 12-month basis, the overall valuations are higher.

But I'm not so sure that I'm right about that anymore because several recent deal comps are showing me that the multiples are actually back to where they were in 2019 in many cases. It depends on the brand. Some brands that haven't had quite the performance and haven't had quite the interest, maybe those multiples have stayed the same or slightly declined. But in some of the brands that are really doing well and have a lot of demand, I think the EBITDA multiples, at least from the standpoint of what I see, are actually flattish to trending higher.

Now, and when you apply that to financials, that may show that EBITDA itself is up 15 or 20% over last year. And maybe the EBITDA multiple, the average EBITDA multiple's gone from let's call it a six to a six and a quarter times EBITDA multiple, If you add those two factors together collectively, you've got some pretty robust increases in valuations. We talked a minute ago about buyers and why people might be in this market to buy, creating demand, even though the supply is up. That's one of the clear factors why people are selling.

So, again, two to 300% increase in transactions on our plate. Part of it is franchisees looking at their businesses and saying, "My EBITDA is up 15 to 20 to 25% on a trailing 12-month basis. And Rick, you're telling me that the EBITDA multiples are now flat to increasing." So the collective, especially if there's real estate involved. And cap rates are strong, really strong. We're starting to hear things as crazy as sub-five cap rate deals going on in the marketplace.

Now, of course, that's heavily brokered 1031 deals and not large portfolios of assets. But even then, we're seeing high fives and low sixes on large portfolio franchise business real estate transactions going on. So the pricing has actually gotten more favorable. Plus, at least on the EBITDA side, a lot of the franchisees' businesses have gotten higher collectively. Bang, you've got a valuation that may be 35, 40% more than it was this time last year.

If you're in this business and you're saying, "I'm 65 years old. My business is worth $30 million last year at this time before the pandemic hit. I didn't just get any smarter. It's not like I just became a brilliant genius in the last year, but now my business is worth $42 million, something like this." I mean, you've just increased the value by $12 million on a post-tax basis. Maybe you're going to take home eight or nine million dollars more for your family, and really just a year has gone by?

That is creating one of the reasons why people are looking at selling. I think the other thing is I'm starting to hear franchisees tell me that they feel like the capital gains increase starting in 2022 is almost a sure thing. I can't comment on that, but I've just heard a lot of people say that it's probably going to happen, the extent of which and the amount of which we don't know. But the consistent drum that I continue to hear is sellers saying, "I may have to work three or four more years, 2022, 2023, and 2024 minimally just to be able to pay off any proposed tax increases on the purchase price if I were to sell it in 2022 or beyond if tax rates increase. And I'm not sure I want to stick around for another three or four years, just to net the same price that I would if I sold and closed the transaction in 2021, assuming there is a big capital gains tax increase."

I mean, it's a fair way to think. It's a fair way to think. I think there's also some psychological burn that's happened over the last year. I mean, it's been hard to staff these restaurants, man. I mean, it just has been, and a lot of franchisees lay in bed at night, staring at the ceiling saying, "How am I going to keep my stores up and running with enough labor?" I think that's been a real concern.

Now with minimum wage potentially on the table, I mean, it didn't make it through the stimulus spending bill, but you saw it if you've been paying attention to the news. It was in there until the very end, and then it got jettisoned out. I mean, it's on the way. A national increase in minimum wage is on the way, and it's coming. It ain't going to be too long until it happens. And so, I think a lot of that is causing sellers to maybe think about their futures.

I was talking with a KFC franchisee up in the Midwest, maybe two or three weeks ago. I started my career in this business really by working for KFC corporate and Yum! Brands. And so, I know all these smaller franchisees. Just known them over the years. This guy just may be owned five or six stores, and he goes, "Rick, I'm 60, some odd years old, and now I'm having to go into my stores and work as a cook again because I don't have enough labor to staff the demand and I can't find the people who want to work for me."

I think it's a consistent theme, the difficulty in finding labor. And so, that's creating people who may be looking at their timeline and saying, "Hey, it might be time to sell." Those are some of the reasons. Again, going back to the EBITDA multiples and cap rates, I think again, to just shift the expectation, that I think the pricing has come up, not only on the EBITDA itself but also on the multiples now. So that's what we're seeing in the marketplace.

Another trend that's happening is a bigger trend of off-market deals. Now, I would say just out of a simple example, typically, in a given year, heck, I don't know, probably 90% of the deals that we do are fully marketed to some group of franchisees. If we're selling someone's business or private equity groups, or family offices, there's just a broad distribution.

Maybe that broad distribution in some cases could look like 15 buyers potentially if you really know who to target it to, because sometimes there's bucket A, sometimes there's bucket B where you market it to three or 400 big, big groups, institutional groups if you have a large deal but you're not sure who the buyer is. Sometimes you market it to 10,000 people or the big, huge, broad distribution, if you want a bigger distribution and more potential offers.

A lot of that, you may get higher pricing if you go into bucket two or bucket three. But you do so at the risk of confidentiality if you're a seller of a business. So we're typically in that process of talking to our clients about how to market a business like that's for sale. But this year, instead of having 90% of our deals dropping in one of those three buckets and probably three-quarters of that 90% are more are going to buckets two or three, we're seeing a bigger trend of off-market deals, quiet one-to-one type of deals.

I don't know if our competitors and other people who do this are seeing the same phenomenon, but we certainly are. It's interesting that that's a new phenomenon coming out of COVID. I don't know exactly why. My guess is there are some of the bigger buyers who maybe are sitting on their hands and aren't aggressively participating in M&A right now because it is so up and down and it's a little bit unpredictable with so much increase in sales and cash flow.

I admit, it is also true that there are new people that have entered the space, new groups, private equity groups, family office groups, who are really aggressive and interested, and they're really wanting deals. And so, it's maybe more obvious who the right buyer is than it has been in the past because more interest has been shown by select groups in the marketplace. It may be because we have sellers who are unsure of... And advisors too who are unsure of what the outcome of the process will be because there's been so much variability in sales and profits over the past 12 months that they're wanting to start quietly to see if some of these big prices that they've been hearing about are real or not.

That's another reason. But whatever the reason is, I think we're seeing more off-market deals than normal. So if you listen to this podcast and you're a potential buyer, if you're an institutional buyer, if you're a strategic buyer, if you're a family office buyer or a private equity buyer, whoever you are, you should be reaching out to us. The one thing I tell folks who listen and talk with me and they call me all the time about this is, one of the first things I ask, if you're an institutional buyer, I say, "Well, what brands are you interested in acquiring?"

And a lot of times I get the answer, "Oh, we're interested in wanting to see all deals and all your deal flow." That immediately says to me... Do you know what that says? That says, "We are unfocused, undisciplined, and we're going to waste everyone's time and never get a transaction accomplished." So I immediately go to those groups. A lot of them are New York-driven, and I say... I'll give you all the same advice if you're listening, narrow your search to two or three brands.

Go deep. Develop a thesis in those two or three brands, and then get your tail ends down to corporate and initiate the process of investigation, exploration of those brands, getting to know them, and management teams, submitting an application with your net worth, and all this stuff, to get yourself at a position where you are preliminarily approved, or maybe financially approved, or at least have had moderate discussions with these three brands and then go at the transaction in those brands.

But what buyers need to understand is if you come to the table in a market like this, where there's a lot of competition for deals, and you're just going to have done no homework with the brand on a deal that you're trying to buy... Let's just say it's a 50-unit Pizza Hut business, and you have no communication with the corporate office at Pizza Hut. And you really haven't put any time into the thesis of Pizza Hut. You're just making an offer or looking at deals.

How do you think a seller's going to look at your offer when someone like us says, "Well, they don't have any contact with Pizza Hut corporate. They haven't initiated the process. They're making an offer here, but they really don't know much about the brand"? How's that going to look in a market where there are more buyers and sellers? It's not going to look good. So if you're an institutional buyer, take note of that.

It's good advice, trust me. Pick two or three brands, be focused, develop a thesis, figure out geography, figure out a plan, find an operator, and do the hard work to predefine this thing upfront so that you can get involved and get the phone call if there's an off-market deal. If a seller says to us that they want to do an off-market deal, then we can confidently think of you for a certain brand and a certain type of transaction.

That's interesting because when you do an off-market deal, our process changes a little bit, and anyone's process would. Typically, to sell a franchise business, it takes, I don't know, maybe six to seven months, sometimes five and a half, sometimes eight months, but I'd say our average deal takes six months. I would say this is probably similar across the industry for most people who do what we do. And most people would just buy things and sell things.

So if you figure a six to seven months transaction soup to nuts, typically looks... We spend a couple of weeks preparing the valuation and learning about the franchisee's business. Put the business on the market for probably four weeks. If there is a lot of demand, we typically invite a couple of groups to a second round. Not always the case, but usually where you get a personal invitation to do like a... The seller gets to know several of the buyers and answers questions and gets to know their plan for their people.

Oh, by the way, if you're making offers on businesses, it's not just the EBITDA. It's not just the number of units. It's actually what you intend to do to the people that really matter to some of these first and second-generation franchisees who spent their lives in the ditch with all these people, caring about them and their families and their schools and their livelihoods. So they really care about that.

But then, typically, once a seller selects a buyer, it takes 30 to 45 days to negotiate an asset purchase agreement or a stock purchase agreement, depending on which of the two it is. Typically, in this industry, it's mostly asset purchase agreements. And then, those deals go to corporate for the right of first refusal and transfer approval. Most corporate entities are thinly staffed and even more thinly staffed than last year.

Most entities in the last couple of years have increased their minimum threshold from 30 days to 45 or 60 days for the contractual amount of time that they're allowed to take before they render their right of first refusal and transfer approval. If you're new to the industry and hear this, it's very rare. I've only seen it less than a handful of times over hundreds and hundreds of transactions over 20 years, where a franchisee actually exercise the right of first refusal.

But they do sometimes not approve the franchisee who wants to make an offer on a business. And so, you have to go through that process. Let's say that takes 60 days. All the while, due diligence is going on. Financing's going on. Lease assignments are happening. Real estate due diligence, if there's real estate that sold with the transaction. Appraisals, environment, and all those things have to happen too.

Then you get to the place where you're five and a half months along, corporates approve, and the bank's ready to go. All the due diligence has been completed. You do the management meetings in the stores and you close the transaction, and bam, maybe ideally around a six-month total timeframe. But when you do have these off-market deals, they tend to react a little bit differently because you are not doing a 30 to 45-day marketing process to find a group of buyers, and then a second-round process to qualify the offers that you've received.

That may be another reason why off-market deals are happening at a greater pace this year, as everyone is aiming to get their transaction completed before the end of 2021. If you do an off-market deal, you have the opportunity, obviously, to keep confidentiality at a maximum, and you can maybe compress the timeline from six to seven months to maybe five to six months with a quicker negotiation process.

Something to note as we move forward throughout the balance of the year and as we sit here in the mid-spring and we just do a quick math project here and we look and we go, "Okay, if I have to close the darn thing by the end of the year, to avoid that the possibility of increased taxes in 2022 in the sale, when do I need to, at the very last minute, be ready to go, to sell my business?" That's a common question. And here's my answer to that. You ought to not count on anything after November 15th, first of all.

Once we get into the holiday season, people just are out of the office more. It's no fault of anybody's, but with Thanksgiving and the Christmas and the new year holidays, you typically have, starting around November 15th, probably like a 20% drop in productivity with all these constituents that need to be involved to get a deal closed, whether it's closing agents, and attorneys, and title companies, and environmental appraisers, and yada, yada, yada, franchisors, and [inaudible 00:29:46].

All these people that have some say in a transaction getting closed, you start seeing this 20 to 30% productivity drop. Then when you get into the second week of December, it really drops in half. So my advice is November 15th, if you're working backward from there, you need to put seven months on it. If you want your deal to close no later than November 15th, if you do that... That's basically if I'm doing my math right. 11 is November and minus seven months is four, which is April.

So you want to be really investigating the process by April the 1st to mid-April to no later than the end of April. By the time you hear this, we're going to probably be past those dates. But I think regardless of what the actual dates are, it's important to just hear that. You typically, in any given cycle, in any given year, in any given process, want to factor seven months, probably maybe six months. And you want to factor in that the last 45 days of the year have a progressive loss in productivity as you push toward the middle of December.

Okay. There you go. What else would I tell you today? I think it's worth noting that with the deals we've had on the market, with the whole buying and selling supply and demand thing, probably the last three or four deals we've had on the market have had multiple full-price offers and multiple people wanting to buy these businesses and take them off the market before our three and a half week initial bid deadline, has expired.

Now, that sometimes happens. If we have a good look at the Taco Bell deal, people will try to take it off the market prior to the bid deadline by wanting to pay an above-asking-price price. It's no different than, I guess if you own a really nice house in Florida and someone wants it. I guess there's no bid deadline in that case, but people want to pay above the asking price to take it off the market quickly. If they see something they want, and I tell you, if you're a buyer listening to these podcasts if you see something you want, and we always tell this to sellers, the best buyer's typically the one that moves the fastest and has the most interest.

So if you do want something, go at it fast and be the most active in the process during the bid process, if you're not going to make an initial offer, try to go quickly with an initial offer. Ask a lot of questions. Raise your hand. Do your due diligence upfront. It is obvious when you look at people who make offers on businesses. We can almost always look at it and say, "Okay, these three buyers are the ones who ask the most questions and then were the most engaged with us over the two-and-a-half, three-week bid process here."

Almost always, those who ask the most questions and are the ones that are the most eager are the ones who are the best buyers. Just that way in almost all buying and selling situations. But I do note that it is rare here. I haven't seen this really much in my 20-year career, that we see so many full-price offers or above-asking price offers, and people wanting to take the business off the table before the bid deadline.

I use an example of the Pizza Hut deal that we're doing that had 12 offers on it, six at or above the asking price, and multiple people asking to take the business off the market. Now, Pizza Hut's a good brand, a great brand. We love it. But it's not traditionally been a brand where people who are buyers have wanted to react that way and go out and grab it so quickly and so forcefully.

So it's not just the Taco Bell deals, the deals that everyone wants. It's moving down maybe a little bit into the tier-one B brands, with the tier-one brands being the most attractive. We call it the tier one B brands being still tier one, large 5,000-unit franchise brands or more, but ones that maybe haven't had historically the amount of attractiveness as maybe some others within that grouping of 10 companies that fit that profile, but also allow free market buying and selling, unlike groups like Chick-fil-A, and McDonald's, and Subway, and 7-Eleven, and groups like that.

But that's one item that's been really shocking. I don't know how long that will last. But my guess is we continue to see that moving forward, at least until the late spring, or early summer. As an aside, we'll see how it all transpires when we get past the COVID period in the trailing 12-month P and L's, and we start hitting June and July, when a lot of these concepts are going to be facing pretty tough comps then, because many of them, not all of them, but many of them had started in June and July, started really by then doing really well on a sales and EBITDA perspective. And we'll be lapping numbers. It'll be more difficult to lap.

I hear a lot of franchisees and some franchisor buddies of mine talk about the full year 2021. We expect to be up three and 4%, 5% full year 2021, but in those details are the... We're up 30 or 40% now and we might be down 8% or 6% for a prolonged period in the early summer, late spring, or early summer, once we get past the initial COVID shock of 2020, something to notice.

But one other item across our nine deals that I would just say is that, once you move past tier one B brands, and my example of Pizza Hut participating in this buying frenzy that's going on now, some of the brands that are lesser in status and scale have not seen the same type of improvement and appreciation. So just note to you that the rich get richer and the poor stay the same, within this industry.

If you have a brand that is doing moderately okay, or it's done really, really well, but it wasn't really an attractive brand to start with, those types of brands are not seeing as much interest or as much appreciation. There are people, like anything in life, who... Let's just use the stock market as an example, who wants to buy things or value? They want to pay a low price for things that have been either beaten up or have performed okay but not great.

You have people who are willing to pay a fair price for things, and you have people who want to buy momentum and growth. They might be a technology stock-buying... It's like the idea of buying a utility stock versus a technology stock. There are plenty of investors for either type of investment, but one's more conservative and more predictable. And the other is much more volatile but has a growth trajectory that people are chasing, even though the price is way higher.

And so, I think you have that same thing going on in this industry, but within it, I think, the value play is not really there as much. Buyers, I'm not seeing at least, are willing to pay as much of a premium that might otherwise be in the market in terms of EBITDA multiple increases and actual EBITDA lifts for brands that are either just boring brands that haven't been doing very well or that are just producing flatus or slightly negative sales, or small unit count brands that really don't have much of a long-term story that's been positive.

There are a lot of those types of brands that maybe have been huge beneficiaries of COVID, but otherwise in 2019, and in reverse, they probably were barely hanging on. But because of their business model, they're doing really well right now. Those have been maybe more of an unexpected challenge to participate in the upside in the market and the upside in the pricing than some of the larger brands, some of the blue-chip brands, and some of the tier one B brands like the aforementioned Pizza Hut deal that are attracting multiple offers at high prices.

Let's see, a couple of other things. This will be a continued droning noise that I'll talk about in the future, but I do hear an increased amount of chit-chat and chattering about automation, drones, and robots as if we were reading a science fiction novel. But I have a lot of people in my ear, both vendors, investors, and certainly franchisees too, who are talking about drones and robots in the back of restaurants for delivery mechanisms, for making hamburgers and pizza in the back of kitchens.

It isn't going to happen immediately. We've been talking about it for several years. But as you see the labor shortage, the availability of labor being a problem going forward, and the price of labor being incredibly expensive, and the razor-thin margins in these QSR restaurants, I think we're going to continue to hear the steady beat of that drum. And there's going to be somebody, I don't know who it is, maybe it's Elon Musk, who the heck knows, he's going to figure out how to do this in a way that's going to absolutely revolutionize this industry. And when they do it, it's going to have...

The first couple of movers who can figure it out are going to blow away other franchise restaurants, just absolutely crush them, because they're going to be able to either lower their prices and increase their margin, or they're going to be able to keep their prices the same and increase their reliability and their profitability because they don't have the turnover issue to deal with as much. It's going to be a huge phenomenon whenever it happens.

I guess, in closing, I would just think of a couple of other items to pass along to you, and then look forward to catching up the next time we talk. Reach out to us, by the way, anytime. Oh, as an aside, Unbridled Capital is about to launch and probably will have launched by the time you hear this, a new website, We've put a lot of time and effort into it. And so, it's going to be really nice. Please check it out.

Much more user-friendly. It's going to have a lot of content. There's a resources page that you'll check out, that's going to be really easy, easily sortable. You're going to be able to easily pull down by topic, by date, by type of platform. You're going to be able to really easily sort and get some good content from us. And that content is going to be like, "Webinar, watch this webinar with Kevin Hochman, the President of KFC and Pizza Hut. Watch this webinar," or sorting by podcast, or sorting by the white paper, or sorting by YouTube video that talks about a specific and narrow topic for a few minutes.

All of that will be at your fingertips. That'll be, I think, really helpful. When you go to our main website at, if you want to join our database, see our deals, or see our marketing stuff, sign up, register, click the box, and do that. And we'll add you to the database and get to know you if we don't know you already. It's an honor and privilege to be part of this awesome industry.

In closing, I guess I would just want to give a shout-out to Texas Roadhouse. It is a brand that has really, really done just remarkable things. They were started in and around Louisville, Kentucky, which for those of you who listen know that I live in Florida now. But I'm originally from Louisville. And so, the corporate headquarters of Texas Roadhouse is in Louisville. It's been a brand that Kent Taylor founded and did just an absolutely tremendous thing with it.

For those of you who eat at Texas Roadhouse, you'll know what I'm talking about. It has such a remarkable appeal. It has, in COVID and otherwise, totally bucked the societal trend of not going to mid-scale casual dining restaurants anymore, and paying tips to people. But Texas Roadhouse stands out as a darling, and it's because their food is great, their culture is great, their people are great, and their locations are great.

It appeals to a large swath of Americana too. Everyone wants to eat a good steak, and eat peanuts, and a good salad, and have a good time, and be treated well. You probably already know before hearing this, Kent Taylor just took his life. Our heart goes out to the Texas Roadhouse family, to Kent Taylor's family, and to everyone in this industry, because he was a Titan in the industry. Did tremendous, wonderful things for the franchise business, for the restaurant business.

It's an iconic brand that we'll never forget, and we won't forget Kent's contributions to not only steak and potatoes but also to the entire franchise business. So our thoughts and prayers are out to that organization and to the Kent Taylor family. Thanks so much for listening. Have a great week!