Dennis Monroe‘s comments on the advantages of sale-leasebacks and private placements as funding options for early-unit franchisees appear in the article “How to Help Small Franchisees Get Financed” in the May issue of Restaurant Finance Monitor.
Sale-leaseback financing, according to Dennis, is an effective tool. “It’s amazing how every town has a number of real estate developers who like to do special, single-purpose sites,” he said. “There’s a lot of real estate money. But it should be used carefully.”
What makes the private placement an attractive option for family or friends of a franchisee who wish to invest in a unit is the general predictability of franchise cash flows. “The one thing most systems have in common is predictable cash flow,” he said. “Do a private placement. You basically determine the cash flow from the unit. You sell a preferred unit that has some kind of coupon, 6-8 percent. The beauty of this is that individuals are looking for returns. A franchise provides nice returns.”
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