Q&A with Franchise Finance Executive

Jun 19, 2023 | Finconomics 101, No Bull Economics

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What Changes to Financing Availability can Operators Expect Over the Next Year?

  • Bank lending has slowed due to increased scrutiny by regulators, and it is becoming more difficult to get full participation for larger syndicated loans ($15MM+).
  • Refinancing has become more challenging, especially for borrowers experiencing even a minor loan covenant trip.
  • Non-bank lenders are playing an increased role as they are not bound by the same stringent oversight as banks and can overlook minor borrower issues, but this typically comes at a higher borrowing rate.
  • The M&A market continues to slow as buyers and sellers adjust to new expectations about unit-level performance at a time when the lending environment has become more cautious.

What is Your Outlook for the Financial Performance of the Restaurant Industry?


  • Operators were unable to raise prices quickly enough to fully offset the impact of higher commodity costs in 2022 and are still grappling with the trade-off between price increases & traffic declines.


  • Margin pressure will continue for most of 2023, although at a slower pace than 2022 with relief for certain commodities that are tracking below their 2022 highs.
  • While labor costs remain elevated (although less so than COGS), the pool of available labor has improved, allowing operators to increase staffing levels.
  • Borrowing rates have increased significantly in a short period of time, but probably won’t go up much higher.

Balance Sheet

  • The financial stimulus tailwind provided by government programs from 2020 – 2022 (PPP, ERC) has run out and much of those funds have been used to cover operating cash shortfalls as opposed to new development (which typically would help expand future cash flows). 

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