GEFF Offers MUOs More Than Just Financing

Capital fuels growth, and multi-unit operators know how important growth is to their success. One finance company making growth happen for many area developers is GE Commercial Finance, Franchise Finance (GEFF). With more than $12 billion in served assets, GEFF has more than 6,000 customers and 21,000 property locations, mainly in the restaurant, hospitality, branded beverage, storage, and automotive industries.

Capital fuels growth, and multi-unit operators know how important growth is to their success. One finance company making growth happen for many area developers is GE Commercial Finance, Franchise Finance (GEFF). With more than $12 billion in served assets, GEFF has more than 6,000 customers and 21,000 property locations, mainly in the restaurant, hospitality, branded beverage, storage, and automotive industries.

GEFF began by providing financing for the restaurant industry, and over time has expanded into several other fields. "We are continually looking to replicate what we consider our core competencies," says Frank Roth, GEFF's senior vice president for global marketing.

GEFF, however, is more than just a lender. "We are financing business events," says Roth. There are four main ways GEFF helps multi-unit operators grow: financing for acquisitions; refinancing of existing debt; financing new unit construction; and financing to re-image franchise units. Its typical range of financing is $50,000 to $200 million, and the average deal is approximately $1 million.

GEFF staff understand the unique nature of franchising and know that multi-unit franchisees want quick responses to their financial needs. Because GEFF has direct lending capabilities, online services, and a dedicated processing staff, it is able to process and fund its customized transactions and remain flexible under aggressive timetables. Many of its express loans are closed within 30 days of credit approval.

Larger, more complex transactions also are funded in condensed time frames. GEFF has professional real estate analysts located nationwide to inspect all of the locations a franchise may own. In a typical year, GEFF staff are able to inspect and evaluate more than 1,000 chain store properties.

Finalizing financing for acquisitions and new construction can take longer. These are often dependent on the borrower, says Roth. In some cases, it may take as long as three or four months to finalize these deals.

Roth says GEFF's clients are especially in need of financing for acquisitions and construction of new units. In addition, there is some pent-up demand in the franchise industry now for financing to help multi-unit operators remodel or re-image their units. GEFF's coast-to-coast presence makes it possible to satisfy the financing needs of a wide range of multi-unit operators. "There is more enthusiasm now for doing a facelift on franchise operations as a way to help drive sales," he says.

Sales-leaseback arrangements, which take into account all four business events, also are popular. Restaurant Resources, based in Clinton, Iowa, is the owner of 16 Pizza Hut franchises. The company is planning an extensive repositioning and remodeling effort to grow business in all of their Pizza Hut locations. GEFF arranged a sales-leaseback for Restaurant Resources valued at $7 million.

"This financing positions Restaurant Resources for long-term growth and diversification," says Bill Pabst, GEFF vice president. "It will allow the company to invest and continue to compete effectively against other chains and restaurants in the market."

With a sales-leaseback arrangement, GEFF provides fair market value for the properties involved. "We literally buy the property from the clients and then we lease it back to them," says Roth. With a long-term lease, Restaurant Resources, for example, is able to control its locations, and still receive equity from the locations, which they can use to grow more units, he says.

Bd's mongolian barbeque is another franchise that recently sought financing assistance from GEFF. The company was able to refinance its existing debt through a $7 million deal financed by GEFF, and committed an additional $1.4 million toward the construction of two new company restaurants in the Detroit area.

Based in Ferndale, Mich., bd's is one of the leaders in create-your-own stir-fry restaurants. With 23 restaurants today, the company plans to franchise 37 more stores in the next five years, expanding to new markets such as Cincinnati, Milwaukee, and Pittsburgh, but keeping its focus in the Midwest. "GEFF really knows the restaurant industry and is committed to seeing us grow," says Todd Pahl, chief financial officer of bd's.

When considering whether to provide funding, GEFF staff consider a number of factors, including the type of industry that needs the financing, the brand, and the operator involved. In the case of bd's, GEFF also looked at all of bd's outstanding debt and determined how to best restructure it to improve cash flow, says Roth.

In addition, he says, "There will always be a request for equity in any deal that we do. If we underwrite a deal, the operator must be engaged in this particular operation, and equity keeps them tied to that."

The staff at GEFF also are happy to consider franchise operators with three to five units. Most national banks would not be willing to consider the financing needs of such a borrower, says Roth. "GEFF is looking at this type of operator's growth needs as a business event, so the solution it offers is a little broader than what a borrower would find at a local bank," he says.

In addition, it is important that multi-unit operators run their businesses on their own terms, he says. GEFF wants to help them do just that. Says Roth: "A lot of our customers tell us that they don't want to be real estate magnates, they just want to run their operations and make income from the operation of the business."

To contact GEFF, call 866-438-4333 or visit the web site at www.cefcorp.com/franchise.

Joan Szabo is a Virginia freelance writer who specializes in finance.