Capital Options - Real Estate Alternatives
Company Added
Company Removed
Apply to Request List

Capital Options - Real Estate Alternatives

Capital Options - Real Estate Alternatives

Established franchisees have seen financing and capitalization alternatives blossom during the past few years. Traditional capital using straight senior financing and embedded equity or external equity capital has evolved to become only one of many alternatives for companies looking to grow.

But it's important for franchisees to have a firm understanding of their business's goals and growth strategies, including generic growth plans, remodeling projects (required and elective), and opportunities to expand through acquisitions, says Carty Davis, a boutique investment bank partner who has completed hundreds of transactions in the multi-unit franchise and restaurant space.

He recently wrote about the importance of understanding the differences between the various types of lenders and capital providers and how to pinpoint the ones that might work best. Here's what he says about one type of capital provider:

  • Real estate alternatives. The sale/leaseback market is another financing alternative for franchisees in need of short-term liquidity. In the long run, most franchisees would be better off owning their real estate to hedge against changing business conditions, but the sale/leaseback market can be an effective tool if needed. Companies should, however, be cautious about selling all their real estate on the sale/leaseback market. It is generally best to look at this as part of a capitalization strategy, not a sole solution. Over time, burdening the operating business with escalated rents can put pressure on covenants like LAL with regulated senior lenders, especially with a brand downturn. Also, lenders will also provide better credit terms when real estate is included in the collateral package.
Published: August 27th, 2019

Share this Feature

ZIPS Dry Cleaners
SPONSORED CONTENT
ZIPS Dry Cleaners
SPONSORED CONTENT
ZIPS Dry Cleaners
SPONSORED CONTENT

Recommended Reading:

Comments:

comments powered by Disqus
Green Home Solutions®
SPONSORED CONTENT

FRANCHISE TOPICS

Potbelly Sandwich Shop
SPONSORED CONTENT
Conferences
Hotel Savoyen, Vienna, Austria
JAN 28-29TH, 2020

Everyone knows a House is a good investment! Huddle House is a full service restaurant, serving delicious meals, cooked to order...
Cash Required:
$200,000
Request Info
We're looking for franchisees and qualified investors with a passion for food who want to invest in a brand that will lead the fast casual barbeque...
Cash Required:
$500,000
Request Info

Share This Page

Subscribe to Multi-Unit Franchisee Report

A Franchise Update Media Production
Franchise Update Media
P.O. Box 20547
San Jose, CA 95160
PH. (408) 402-5681
In Loving Memory Of Timothy Gardner (1987-2014)

Copyright © 2001 - 2019.
All Rights Reserved.