Rich C. - They will typically NOT own the dirt. If a franchisee takes on a 10-store agreement, they may have one or two marquee stand-alone locations. The others would be a combination of end-caps in a strip mall and atypicals (like in a sporting arena or large store).
Rich, both small deals and large, here are a few examples:
Scenario 1: Existing franchisee in New England. We sell him 27 existing stores in New York for $27M. He finds an investor who injects $6.5M and gets a 30% share of the new corporation. Commercial lender finances the remainder.
Scenario 2: Existing franchisee in upstate New York. We sell him a Store Development Agreement for 31 (new) stores in the Carolinas. He finds an investor who puts $3M liquid and $6M equity into the deal and gets 55% of the ownership of the new corporation. Commercial lender finances the remander.
Scenario 3: Existing franchisee in New England. We sell him a Store Development Agreement for 5 (new) stores in Atlanta. We require the franchisee to have $750K liquidity to enter the agreement; he has $250K. Need an investor to inject $500K.
The more financially sophisticated franchisees have found investors who inject liquidity in return for, say, a 30% cut of the corporation.
I`m picturing a mezzanine investor. The banks typically are conservative in these new markets and lend 70%, the existing franchisee usually has 10%...if I could find a mezz investor who wants to put in 20% it would allow some of these experienced operators to expand.
Hello, I am a finance manager for Dunkin` Brands (www.dunkinbrands.com). I am looking for investors who want to fund existing franchisees as they expand into new markets. I have very experienced franchisees who are excellent operators and our franchising teams want them to expand into new markets such as Nashville or Atlanta. Problem is, they don`t have the financial connections to obtain funding and traditional commercial lenders are reluctant to go into new markets. So, I am trying to marry these existing franchisees with investors to foster expansion.
Does anyone know of any investors who might be interested in this opportunity?