Financing For Your Small Business
Apply For Funding Today! | contact@funder.org
|
Posted on Sun, 11/13/2011 - 07:23 PM by
viewed 103 times
Last week, I published the Restaurants and Private Equity, 2011 Update Paper. It is available here: (www.bluemaumau.org/restaurants_private_equity_and_franchising_overview). At the time, we noted that Burger King's 2010 $4B acquisition by 3G Capital, was in the still to be determined status, i.e., whether it worked for investors, franchisees, and the brand itself. On Thursday November 10 2011, Burger King held its Q3 2011 earnings call and filed its 10Q with the SEC. Company and debt tolerance conditions are apparently favorable enough for its PE owner that it is now working a $393M dividend payable back to 3G Capital, by December. It was noted in the earnings call briefly, and the wording from the recent 10Q is below: On October 19, 2011, the Board of Managers of BKCH approved a distribution to Parent and, subject to such distribution, the Board of Directors of Parent approved a return of capital distribution to the shareholders of Parent, including 3G, in the amount of $393.4 million, representing the net proceeds from the sale of the Discount Notes, payable by December 16, 2011, provided that the Board of Parent does not act to revoke its decision to declare the return of capital distribution prior to the payment date. What surprises us that is this is possible given that Burger King still owns and operates 1295 units, world-wide, mostly in the US and Canada. When BKC was acquired by 3G, one of the due diligence concerns known to everyone in the restaurant sector was that Burger King units, both company and franchisee operated stores, were in need of remodel and store physical plant renewal, estimated then at $3B. If all BKC company stores were remodeled at BKC's just updated cost of $200-300K per store, that would be a $3.2 billion CAPEX tab. This remodeling deficit itself was a partial legacy of the $200M BKC CAPEX "cap" that it operated under after prior PE owners Bain Capital/Texas Pacific Group/GSCG PE group, took it public in 2006. Evidently, this decision implies the cost of 3Gs cost of capital (for the borrowed debt) is greater than the upside return from remodeling restaurants, and the anticipated, hopefully positive sales and profitability results that may result. Otherwise, why would 3G do it? To be sure, since acquisition, 3G has swept out the prior Burger King executive management clique, set up a loan program for franchisees, changed ad agencies and marketing thrust, and rolled out new products. Company EBITDA dollars are improved. As always, franchisee cash flow conditions aren't reported, but with some high profile franchisee auctions and liquidations noted in 2010 and 2011. The 3G Capital investment priority signal is perplexing, perhaps signaling a slower US recovery reality.
John A. Gordon, chain restaurant analysis and advisory, www.pacificmanagementconsultinggroup.com
MORE NEWS FROM BLUEMAUMAUGoing Green Costs Franchisees Much GreenBeing forced to buy imaginary products is just one of the nonsensical results of government policy affecting franchisors and franchisees. Good News, U.S. Hotel Profit RecoveryAccording to the new PKF Trends survey, the U.S. lodging industry produced a 12.7% profit growth in 2011. 80.5% of participating hotels enjoyed an increase in total revenue while 72.3% achieved growth in profits. The recently released 2012 edition of Trends presents data from a sample of nearly 7000 financial statements of United States hotels. For the Trends report, hotel profits are defined as net operating income (NOI) before deductions for capital reserves, rent, interest, income taxes, depreciation and amortization. Federal Court Invalidates "Quickie" Union Election Rule, For NowOn May 14, 2012, the U.S. District Court for the District of Columbia set aside a controversial final rule of the National Labor Relations Board ("NLRB") that was designed to make it easier and faster for unions to hold organizing elections. Chamber of Commerce of the United States of America, et al. v. NLRB, Case No. 11-02262 (D.D.C. May 14, 2012). Business groups are hailing the decision, but the celebration may be short lived. Because the ruling was essentially decided on a procedural point, the NLRB may seek to resurrect the rule, which creates a very short window for union elections, and leaves employers with little time to react to an organized union campaign. Field Representatives Coach Franchisees to Victory
A good coach will make his players see what they can be rather than what they are. "Live For Now" Stars Dead IconPepsiCo announced aggressive marketing plans, boosting ad spending by 20% and bringing back deceased pop icon Michael Jackson as part of a worldwide campaign. RELATED SMALL BUSINESS NEWSHot Franchise Topic: Getting a LoanIt seems like the entire franchise industry is focused on funding, and with good reason; franchise loans are still a bit challenging to secure. Production Agreements of a Supply Chain; The Other End of the RainbowMany years ago I was pulled away from my usual assignments to do a major product production tolling agreement between two of America’s larger food companies. It was a stroke of luck for me because it provided something new for my interest in multivariate risks management. Since then I have prepared many multivariate high risk agreements, and it is always an enjoyable as well as remunerative adventure. When you think of every brand as a franchise in itself, it fits perfectly into my customary practice of managing franchise relationship disconnect issues. Know the Benefits of Application Protection in Any OrganizationIt is very important to ensure proper method of data availability on time. In that case, replication needs to be adopted in order to manage current backup information and system settings so that it can deliver fast restoration of data after any kind of disaster. As we know that it is not possible to avoid any kind of natural disaster or human error; but it is always mandatory to take proper measures for application protection, so that users do not face any kind of problem related to data loss. And, data replication is found to be the only way to remove or minimize the time lapse experienced in these situations. Pepsi Wants a New GenerationEverything the light touches this year is rapper Nicki Minaj’s kingdom. From the Billboard Top 100 to the Super Bowl half-time show, and her reign is about to expand to a major role in a new ad campaign for Pepsi. A Business Plan Should be a Requirement for Buying a FranchiseVisit any website that offers advice on starting a new business or expanding an existing one and you’ll find articles and advice on the importance of writing a business plan. There are tips ranging from how to write an effective business plan to the reasons why it’s so important. |
Get funding to grow your small businessLet us help you find the best financing option for your business needs.
Stay up-to-date with our small business newsletterTweet, +1, and Like FunderFollow Us  |
|
Copyright © 2012 RBF Management, LLC | Lighter Capital Network™ Privacy Policy | contact@funder.org |