Industry Data Report...Please note the following valuation multiples include a standardized allocation for G&A on a per unit basis. For more detail on the valuation methodology, refer

Building Bridges between Franchisees, Franchisors & Financiers

Industry Data Report Finance & Valuations – 2020

• RR’s Finance & Valuation report is based on survey responses (equally weighted) from 52 finance companies

including traditional cash flow franchise lenders, sale leaseback companies, SBA lenders, equipment finance

companies and financial consultants/advisors.

• Report highlights: (1) 2019 restaurant financing volume of $9.6 billion represents a -3.3%% y/y decrease and the

3rd consecutive year of declining volume that was also below initial survey expectations – we estimated $15.6 billion

in total financing needs for 2019; (2) 2020 origination prospects are expected to come in slightly higher at $9.9

billion; (3) the total financing portfolio outstanding grew +2.6% to $54 billion in 2019; (4) underwriting standards

are tightening slightly and LIBOR spreads increased in 2019 as lenders grow more cautious given expanding loan

portfolio concentrations although overall lending rates remain favorable due to lower base interest rates; (5) private

EBITDA unit level valuation multiples for large chains and large deal premiums remain slightly pressured due to

ongoing unit level margin challenges; (6) public franchisor EV/EBITDA multiples continue to ramp higher relative

to private franchisee EBITDA multiples (driven by FSR strength) and the public multiple premium is at the top of

our historic range (reflecting an asset light model and buyout premiums paid by private equity buyers); and (7) cap

rates fell from 1H:19 and are at the lowest level since at least 2008.

Table of Contents Page Financing

➢ Restaurant Finance Overview 2

➢ Origination Volume & Portfolio Size 3

➢ Estimated Franchisee Financing Needs 4 - 5

➢ Key Rates 6

➢ Equity Requirements 7

➢ Leverage Ratios 8

➢ Loan & Amortization Terms 9

➢ SBA $1B+ Chain Lending Data 10 – 11

➢ Franchisor Royalty Securitizations 12

Valuations

➢ 2H:19 Valuation Update 13 - 14

➢ EBITDA Multiples by Chain 15

➢ Factors Impacting Valuations 16

➢ Public Company Valuations 17 - 18

➢ Real Estate Cap Rates 19

➢ Valuation Methodology 20

Survey Participants & Contact Listing

➢ Survey Participants & Roster Changes 21

➢ Key Finance & Valuation Contacts 22 - 23

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 2020

Restaurant Research® LLC. All rights reserved.

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IDR: Finance & Valuations Source: RR Estimates Page 2

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Origination Volumes & Portfolio Size

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Estimated Annual Franchisee Financing Needs

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Key Rates

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Equity Requirements

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Leverage Underwriting Ratios

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Loan & Amortization Terms

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SBA $1B+ Chain Lending Data

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SBA Lending Program Overview SBA

Program

Purpose Loan

Amounts

Interest

Rate

Maximum Terms Equity & Collateral

Standard

7(a)

504 -

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Contact Restaurant Research to Purchase Complete $1B+ Chain SBA 10 -year Data Set

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Franchisor Royalty Securitizations

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Estimated Franchisee Unit Level Valuations

➢ RR’s franchisee unit level business valuations (post G&A EBITDA multiple) are based on estimates provided

by 8 leading appraisal firms (responsible for approximately 1,800 store valuations over the last 6 months

across 45 national chains). Multiples are generally indicative of deal sizes below $500k in EBITDA

and/or 5 units.

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➢ Please note the following valuation multiples include a standardized allocation for G&A on a per unit basis.

For more detail on the valuation methodology, refer to page 20.

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Summary of Valuation Comments

Availability of

Capital

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Financing

Terms

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Unit Level

Economics

➢

Availability of

Units for Sale

➢

Survey Participant Contact Information

Firm Contact Main Number Email

Source: Restaurant Research LLC December 2019 Valuation Survey

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Public Company Valuations (EV/EBITDA)

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Marcus & Millichap Real Estate Cap Rates

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About the Contributing Firm: 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 Marcus & Millichap at (206) 826-5730

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Valuation Methodology

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➢ Development agreements

(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 Implied Rent/Sales

Adjusted EBITDAR Implied Rental Income

Implied Rent Cap Rate

Adjusted EBITDA Real Estate Value

Multiple

Business Value Total Value

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Industry Player Roster Changes New Entrants/Mergers Exits

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Restaurant C&G Other RetailReal

EstateEquipment Enterprise SBA Min Max Avg

Yrs. In

Business

Units

Owned

Amegy Bank

Atlantic Capital Bank

Bank of America

Bankers One Capital

BBVA Compass

Bci Capital Franchise

Finance

BMO Franchise Finance

BOK Financial

Bridge Funding Group,

Inc.

Cadence Bank

Capital One National

Association

CIT Bank

Citizens Bank

Restaurant Finance

City National Bank

Customers Commercial

Finance, LLC

Fifth Third Bank

First Fidelity Bank

First Franchise Capital

First Horizon Bank,

Restaurant Finance

Flagstar Bank

Gulf Coast Restaurant

and Franchise Finance

HSBC Bank USA

Huntington National

Bank

Live Oak Bank

M & T Bank

Manufacturers Bank

Marlin Capital Solutions

Mechanics Bank

MidCap Financial

MUFG Union Bank

Northern Bank & Trust

Pacific Premier Bank

Franchise Capital

Pinnacle Commercial

Capital

Regions Restaurant

Bank

Signature Financial

Sterling National Bank

Stonebriar Commercial

Finance

Restaurant Research Franchise Finance Contacts - 2020

Company Contact Phone #Regional

Focus

Industries Served Type of Financing Development

Financing

Typical Deal sizeMinimum

Requirements

Finance Companies

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Restaurant C&G Other RetailReal

EstateEquipment Enterprise SBA Min Max Avg

Yrs. In

Business

Units

Owned

Restaurant Research Franchise Finance Contacts - 2020

Company Contact Phone #Regional

Focus

Industries Served Type of Financing Development

Financing

Typical Deal sizeMinimum

Requirements

Finance CompaniesTCF Commercial

Finance

TD Bank - Restaurant &

Franchise Finance

Texas Capital Bank

Vendor Alliance Capital,

Inc.

Wells Fargo Bank -

Restaurant Finance

Western Alliance Bank

Western Equipment

Finance, Inc.

Wintrust Franchise

Finance

Marcus & Millichap

Peak Franchise Capital

LLC

Trinity Capital, LLC

Advanced Restaurant

Sales, LLC

Auspex Capital

NDA, Inc.

FranBizNetwork

Main Street Florida

Realty, Inc.

National Franchise

Sales

Newmark Knight Frank

Valuation & Advisory

Praetorian Group

Trinity Capital LLC

Valuation Experts/Brokers

Sale Leaseback Companies

Financial Advisors

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Visit www.chainrestaurantdata.com or contact us at

(860) 352-2198 or [email protected] to:• Ask us about custom research projects

• Inquire about RR Thermometer email marketing opportunities

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 2020 Restaurant Research® LLC. All rights

reserved.

Sources: All data represents RR estimates which are derived from various private and public sources.

Disclosure: Restaurant Research LLC often sells report subscriptions to concepts under our coverage.

Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research® LLC

believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice

and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant

Research’s analyses and opinions are not a guarantee of the future performance of any company or individual franchisee.

RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report

available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide

an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business

judgment.

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Documents

Industry Data Report...Please note the following valuation multiples include a standardized allocation for G&A on a per unit basis. For more detail on the valuation methodology, refer