Industry Data Report Finance & Valuations 2016 RR s Finance & Valuation IDR is based on survey responses (equally weighted) from 43 finance companies including traditional cash flow franchise lenders, sale leaseback companies, SBA lenders, equipment finance companies and financial consultants/advisors. Report highlights: (1) 2015 restaurant originations reached an all-time high and surpassed initial year expectations; (2) flat 2016 origination prospects reflect GE Capital s uncertain future; (3) borrowing rates continue to decline due to narrower loan spreads and still low index rates; (4) EBITDA valuation multiples for large chains continue their steady improvement, but may be peaking; (5) the disparity between private and public company valuations narrowed to 2012 levels; and (6) cap rates reached new lows. Table of Contents Page Financing Restaurant Finance Overview 2 Origination Volume & Portfolio Size 3 Estimated Franchisee Financing Needs 4 Key Rates 5 Equity Requirements 6 Leverage Ratios 7 Loan & Amortization Terms 8 Valuations 2H:15 Valuation Update 9 EBITDA Multiples by Chain 10 Franchisee EBITDA Multiple Estimates 11 Factors Impacting Valuations 12 Public Company Valuations 13-14 Real Estate Cap Rates 15 Valuation Methodology 16 Survey Participants & Contact Listing Survey Participants & Roster Changes 17 Key Finance & Valuation Contacts 18-19 Copyright: This Restaurant Research LLC document is copyrighted material. Due to the No Electronic Theft (NET) Act of 1997, electronic forwarding or other forms of redistribution, without the express permission of Restaurant Research LLC, are violations of law and could be subject to fines of up to $250,000 and up to five years of imprisonment, even when no financial gain or commercial advantage accrues to the forwarder/re-distributor. Copyright 2016 Restaurant Research LLC. All rights reserved.
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Origination Volumes & Portfolio Size IDR: Finance & Valuations Source: RR Estimates Page 3
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Key Rates IDR: Finance & Valuations Source: RR Estimates Page 5
Equity Requirements IDR: Finance & Valuations Source: RR Estimates Page 6
Leverage Underwriting Ratios IDR: Finance & Valuations Source: RR Estimates Page 7
Loan & Amortization Terms IDR: Finance & Valuations Source: RR Estimates Page 8
Estimated Franchisee Unit Level Valuations RR s franchisee unit level business valuations (post G&A EBITDA multiple) are based on estimates provided by 7 leading appraisal firms (responsible for approximately 2,800 store valuations over the last 6 months across 44 national chains). Multiples are generally indicative to deal sizes below $500k in EBITDA. IDR: Finance & Valuations Source: RR Estimates Page 9
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Source: Restaurant Research LLC January 2016 Valuation Survey Availability of Capital Financing Terms Unit Level Economics Availability of Units for Sale Summary of Valuation Comments Survey Participant Contact Information Firm Contact Main Number Email Advanced Restaurant Sales, LLC EPK National Restaurant Appraisal FranBizNetwork Hopkins Appraisal Services, Inc. National Franchise Sales National Restaurant Brokers, Inc. Praetorian Group IDR: Finance & Valuations Source: RR Estimates Page 12
Public Company Valuations (EV/EBITDA) IDR: Finance & Valuations Source: RR Estimates Page 13
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Marcus & Millichap Real Estate Cap Rates About the Contributing Firm: The Nisbet Group is a member of the National Retail Group of Marcus & Millichap which specializes in representing institutional and private companies in the disposition of multi-tenant and single tenant retail properties. For more information, please contact Hank Wolfer of The Nisbet Group at (206) 826-5730 IDR: Finance & Valuations Source: RR Estimates Page 15
Valuation Methodology (1) Business Value is determined by using an appropriate multiple of adjusted EBITDA. - - - - Some typical EBITDA adjustments include: (2) Real Estate Value (land and building) is determined by: - - - Example - Fee Restaurant Property Business Value Real Estate Value Sales Adjusted EBITDAR Implied Rent Adjusted EBITDA Multiple Business Value Implied Rent/sales Implied Rental Income Cap Rate Real Estate Value Total Value IDR: Finance & Valuations Source: RR Estimates Page 16
Industry Player Roster Changes Entrants/Expansion Exits/Contraction M&A/Partnerships (1) IDR: Finance & Valuations Source: RR Estimates Page 17
Company Contact Phone # Amegy Bank Terry Morales (713) 705-6190 Texas & Gulf Coast X X X X X X Yes $5M $20M 5 10 ApplePie Capital John Neff (415) 688-4599 USA X X X X $100k $2.5M $400k Ascentium Capital Angela Anderson (281) 902-1972 USA & Canada X X X Yes $5k $1.5M $100k 3 2 Atlantic Capital Bank Mike Smith (404) 460-4426 USA X Auto Parts X X X X Yes $150k $15M $750k 0 0 Bank of America Merrill Lynch Shawn Janko (404) 607-2449 USA X X X $10M+ 5 6 Bankers One Capital Reginald Heard (203) 791-9998 USA X X X X X X Yes $10k $10M $750k 0 0 BBVA Compass James Short (602) 285-3691 USA X Branded Beverage X X X X Yes $3M $50M $20M 5 10 BMO Harris Bank Rick Thompson (949) 413-3450 USA X X X X $10M N/a $15M Bridge Funding Group (United Capital) Bill Wildman (800) 928-8537 USA X Fitness, Auto Aftermarket Yrs. In Business X X X Yes $500k $20M $3M 3 3 Cadence Bank Dan Holland (770) 274-6877 USA X X X X X Yes $5M $30M $17M 5 10 Capital One, National Association Nancy McIver (732) 321-4698 USA X X X X X X $10M $50M $30M 8 20 CIT Franchise Finance Douglas McKenzie (416) 507-5019 USA X Yes $1M $50M 3 Citizens Bank Restaurant Finance Armando Pedroza (949) 726-7307 USA X X Sports Finance X X X X Yes $1M $500M $15M 5 5 City National Bank David Sandoval (213) 673-9026 USA X X X X $2M $50M $10M 5 3 Direct Capital Eric Renaud (603) 766-9373 USA X X Hotel, Fitness X X X $2k $20M $110k 3 2 Franchise Group Auto Care & Element Financial Bernard Lajeunesse (267) 960-4016 USA X X X Yes $500k $15M $3.5M 3 3 Healthcare EverBank Joseph Eichler (904) 623-6605 USA X X X X Yes $3M $20M $10M 5 10 Fidelity Cooperative Bank First Franchise Capital Corporation Sally Buffum (508) 340-8387 Northeast X X X X X X Yes $10M $1M 3 3 Richard Riecker (201) 326-4021 USA X X X X $200k $20M $1.5M 3 5 First Tennessee Bank Joe Evangelisti (901) 523-4114 X X X Yes $10M 30 FranFund\Mount Pleasant Capital Huntington National Bank Bob Rodi (877) 635-0643 USA X Other Retail X X X Yes $50k $5M $450k 0 0 John Luehmann (614) 480-4400 M & T Bank Karen Schonfeld (410) 244-4252 Restaurant Research Franchise Finance Contacts - 2016 Regional Focus Midwest/ North East/ Mid Atlantic Northeast, Mid- Atlantic, Florida Industries Served Type of Financing Typical Deal size Development Real Restaurant C&G Other Retail Estate Equipment Enterprise SBA Sale- Financing Min Max Avg Leaseback Finance Companies X X X X X Yes $1M $40M $10M 3 5 X X X X X X Yes Minimum Requirements Manufacturers Bank Ed James (213) 489-6214 USA X X X X X X $25k $20M $1M 2 1 Marlin Franchise Hospitality & Chris Holland (856) 505-4206 USA X Finance Group Automotive X X Yes $5k $1M $100k 0 1 Pacific Premier Franchise Capital Sharon Soltero (402) 562-1801 USA X X X X X $500k $25M $1.1M 3 3 PNC Bank Dale Mancuso (312) 384-4646 X X X X X Yes $100k $15M $1.25M 0-3 4 Regions Restaurant Banking Group Robert Daniel (404) 888-5108 USA X X X X Yes $10M $75M $25M 10 10 Signature Financial John Black (817) 446-0120 USA X X X X Yes $1M $25M $5M 5 5 Units Owned
Company Contact Phone # Susquehanna Commercial Finance Restaurant Research Franchise Finance Contacts - 2016 Regional Focus Brian Colburn (443) 966-1792 USA X Industries Served Type of Financing Typical Deal size Development Real Restaurant C&G Other Retail Estate Equipment Enterprise SBA Sale- Financing Min Max Avg Leaseback Hair Care, Fitness Minimum Requirements Yrs. In Business X Yes $10k $5M $300k 2 2 TCF Franchise Finance Bill Johnson (952) 656-3268 USA X Auto & Fitness X X X No $250k $20M $1M 3 3 TD Bank Brian Frank (203) 761-3818 Eastern Coast X X X X X Yes $500k $25M $7.5M 10 5 Units Owned Vendor Alliance Capital, Inc. Wells Fargo Bank - Restaurant Finance Group Jim Pinho (978) 681-4000 USA X X X X $150k $10M $1.25M 2 2 Quinn Hall/ Steve Leon (770) 795-9861 (760) 918-2752 USA & Canada X X X X X X X No $1M $20M 3 5 Western Alliance Bank Rob Gramhill (602) 797-3613 Western USA X X X X X X X Yes $25M $5M 2 Wintrust Franchise Services The Nisbet Group of Marcus & Millichap Sandra McCraren (847) 432-2488 USA X Fitness X X X X $25M $3M 3 Centers Sale Leaseback Companies Hank Wolfer (206) 826-5730 USA X X X N/a $500k $5M $1M Auspex Capital, LLC Shriram Chokshi (562) 424-5157 USA X X Capital Growth Advisors, LLC FocalPoint Partners LLC Franchise Capital Advisors Pacific Management Consulting Group Peak Franchise Capital LLC Philip McDonough (203) 622-0756 USA X Rod Guinn (505) 828-4662 USA X Fitness Centers Ryan Kress (480) 355-4390 USA X X X John Gordon (858) 874-6626 USA X Michael Elliott (972) 719-5690 USA X Trinity Capital, LLC Kevin Burke (310) 268-8330 Advanced Restaurant Sales EPK National Restaurant Appraisal Robert Hunziker (678) 229-2384 Ext. 1 Ed Karabedian (407) 375-9307 FranBizNetwork Emily Burns (925) 391-2726 Hopkins Appraisal Services, Inc. National Franchise Sales National Restaurant Brokers, Inc. Praetorian Group Brock Rule (816) 373-1890 Alan Gallup (949) 428-0483 Dejan Vojnovic (888) 303-7900 Manny Armesto (888) 358-3325 Ext. 226 USA & Select International X X X Financial Advisors Valuation Experts/Brokers $1M EBITDA $5M EBITDA $500k EBITDA $2M EBITDA $2M EBITDA $5M Sales $3M Sales $1M Sales $15M Sales $5M Sales $50M Sales 3 to 5 3 4 3 to 5 2 to 3 5 7 3 5
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