An Overview of the Challenges Facing Franchising - International ...
An Overview of the Challenges Facing Franchising - International ... An Overview of the Challenges Facing Franchising - International ...
An Overview of the Challenges Facing Franchising Nigel Travis, President & CEO, Dunkin’ Brands, Inc. (Dunkin’ Donuts/Baskin-Robbins) Mark Edwards, SVP, Senior Loan Administrator, BB&T, Commercial Credit Administration Bob Dorfman, Five Guys Burgers & Fries (Multi-Unit Franchisee) Hank Bharmal, FASTSIGNS International (Two-Unit Franchisee) Shelly Sun, CFE, CEO & Co-Founder, BrightStar Franchising, LLC Todd Jones, Managing Director, GE Capital Americas, Franchise Finance Moderator: Mary Jo Larson, Publisher, Franchise Times
- Page 2 and 3: Business and Banking Partnerships S
- Page 4 and 5: Wider Economic Return on Investment
- Page 6 and 7: Investment in Existing Businesses a
- Page 8 and 9: TCH Restaurant Group Doing busines
- Page 10 and 11: How we can work together Lenders ne
<strong>An</strong> <strong>Overview</strong> <strong>of</strong> <strong>the</strong><br />
<strong>Challenges</strong> <strong>Facing</strong> <strong>Franchising</strong><br />
Nigel Travis, President & CEO, Dunkin’ Brands, Inc. (Dunkin’<br />
Donuts/Baskin-Robbins)<br />
Mark Edwards, SVP, Senior Loan Administrator, BB&T, Commercial<br />
Credit Administration<br />
Bob Dorfman, Five Guys Burgers & Fries (Multi-Unit Franchisee)<br />
Hank Bharmal, FASTSIGNS <strong>International</strong> (Two-Unit Franchisee)<br />
Shelly Sun, CFE, CEO & Co-Founder, BrightStar <strong>Franchising</strong>, LLC<br />
Todd Jones, Managing Director, GE Capital Americas, Franchise<br />
Finance<br />
Moderator: Mary Jo Larson, Publisher, Franchise Times
Business and Banking<br />
Partnerships<br />
Short-Term Capital Investments, Long-Term Economic Benefits<br />
Hank Bharmal, FastSigns franchisee
Investment Scenario<br />
$100k to $150k short term loan<br />
3 to 5 year term<br />
6% to 10% loan rates<br />
If for equipment, risk mitigated by depreciated<br />
value <strong>of</strong> <strong>the</strong> equipment<br />
$500k to $1 million long term loan<br />
7 to 15 year terms<br />
6% to 10% loan rates<br />
Based on sound business planning and financial<br />
projections
Wider Economic Return on Investment<br />
Short Term Loan – ROI over term <strong>of</strong> 5 year loan<br />
Payroll increase by $300 k to $500 k ($60k to $100 k a year)<br />
COGS expenditure increase by $450 k to $ 750k (90k to<br />
150k a year)<br />
Subcontracted services increase $ 200 k to $ 450 k (40k to<br />
90k a year)<br />
Taxes generated – approximately $500 k to $750 k (includes<br />
sales, corporate, payroll)<br />
$100 k can return over 10 x return over <strong>the</strong> term <strong>of</strong> <strong>the</strong><br />
loan above and over <strong>the</strong> repayment <strong>of</strong> <strong>the</strong> loan and<br />
continues to increase <strong>the</strong> return in <strong>the</strong> larger economy.
Wider Economic Return on Investment<br />
Long term Investment – ROI over 7 years term <strong>of</strong> loan<br />
Payroll can increase to over $1.4 Million ($200k to $250k a<br />
year)<br />
COGS can increase to over $1 Million ($150 k to $200 k a<br />
year)<br />
Subcontracted services increase to over $500 k (70+ k a<br />
year)<br />
Taxes Generated $750 + k ($125+ k a year includes sales,<br />
corporate, payroll)<br />
$1 Million can return 3.6 x multiplier to larger economy<br />
above and over repayment <strong>of</strong> loan on an ongoing basis<br />
every loan term time segment
Investment in Existing Businesses and<br />
Business Ideas<br />
Improves repayment <strong>of</strong> loans<br />
Improves overall economy by:<br />
Multiplying long-term payroll<br />
Goods and Services expenditure<br />
Improves <strong>the</strong> chances <strong>of</strong> new untried businesses to<br />
succeed by having vibrant environment to operate in.<br />
Allows business owners and managers to work on <strong>the</strong>ir<br />
businesses ra<strong>the</strong>r than work in <strong>the</strong>ir business which<br />
leads to much faster growth and much more pr<strong>of</strong>itable<br />
businesses.
Five Guys, <strong>the</strong> franchise<br />
Five Guys started in 1986 by <strong>the</strong> Murrell Family in<br />
Virginia.<br />
<strong>Franchising</strong> began in 2002; only 8 Five Guys existed.<br />
Today, <strong>the</strong>re are approximately 770 restaurants coastto-coast,<br />
120 <strong>of</strong> <strong>the</strong>m corporate locations.<br />
Fastest growing restaurant chain in 2009 & 2010.<br />
Simple, high quality menu.<br />
Outstanding economic business model.<br />
Bob Dorfman,<br />
Five Guys franchisee
TCH Restaurant Group<br />
Doing business as a Five Guys Burgers & Fries franchisee<br />
Joined <strong>the</strong> system in 2005.<br />
Acquired <strong>the</strong> development rights for Tampa, FL, Columbus, OH,<br />
Houston and South Texas. Total rights for at least 103 stores.<br />
Opened first restaurant in Tampa, FL in 2006.<br />
Today, we have 29 restaurants open, projected to have a total <strong>of</strong><br />
40 opened by year end.<br />
Second largest Franchisee in <strong>the</strong> Five Guys System and largest<br />
contributor to Five Guys overall growth in 2009.
Why help us grow<br />
Very strict franchisor processes, systems and operating standards.<br />
Impressive economic investor model.<br />
Investor returns have exceeded projections.<br />
TCH has demonstrated significant year-over-year EBITDA growth.<br />
We are willing to share equity for accelerated growth.<br />
We have <strong>the</strong> infrastructure in place to rapidly grow, both within our<br />
development territories, and outside.<br />
Franchisee consolidation provides a huge growth opportunity.<br />
We have identified pertinent exit strategies.
How we can work toge<strong>the</strong>r<br />
Lenders need to gain a better understanding <strong>of</strong><br />
franchising, and we’re willing to help.<br />
Investing in successful franchise systems is less<br />
risky.<br />
Banks and o<strong>the</strong>r lending institutions need to not<br />
only look at historic performance, but reasonable<br />
going forward projections, based on <strong>the</strong> use <strong>of</strong><br />
capital provided.<br />
Private investors remain a very viable source <strong>of</strong><br />
capital.
Panel members<br />
Nigel Travis, President & CEO, Dunkin’ Brands, Inc. (Dunkin’<br />
Donuts/Baskin-Robbins)<br />
Mark Edwards, SVP, Senior Loan Administrator, BB&T, Commercial<br />
Credit Administration<br />
Bob Dorfman, Five Guys Burgers & Fries (Multi-Unit Franchisee)<br />
Hank Bharmal, FASTSIGNS <strong>International</strong> (Two-Unit Franchisee)<br />
Shelly Sun, CFE, CEO & Co-Founder, BrightStar <strong>Franchising</strong>, LLC<br />
Todd Jones, Managing Director, GE Capital Americas, Franchise<br />
Finance<br />
Moderator: Mary Jo Larson, Publisher, Franchise Times