Franchise Lenders Advise Long-Term Outlook Amid Economic Headwinds
Franchise lenders highlight financing caution amidst economic challenges for operators.
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A recent panel during Franchise Times’ Dealmakers Week highlighted the need for operators to approach financing with caution due to rising economic headwinds. Lenders emphasized the importance of understanding the terms of capital structures and ensuring financial resilience to withstand potential downturns in performance.
Why It Matters
This discussion may signal increased scrutiny on financing terms, which could affect franchisors and franchisees alike when considering growth strategies in challenging economic conditions.
Franchise lenders are advising restaurant operators to adopt a long-term, cautious approach toward financing amidst challenging economic conditions, as highlighted during the recent Franchise Times Dealmakers Week webinar. Key insights from the panel suggest that while financing options may appear favorable now, operators should be wary of potential future difficulties. Joe Philip, head of the restaurant and fitness finance group at First Horizon Bank, emphasized that a lenient capital structure might conceal underlying operational challenges, stating, “As you work toward the most advantageous structure that provides the loosest terms and most capital, just know that you may need to exercise caution.”
John Dysart, executive vice president at M&T Bank, reinforced this caution by noting the quick shifts in market conditions, asserting that what seems beneficial today could rapidly become less so. He urged operators to focus on creating resilience in their business, saying, “I think paying attention to not just sitting where you are today, and [looking at] the terms you can get today, but really making sure you can withstand a meaningful downturn.”
Cristin O’Hara from Bank of America added that as businesses continue to analyze rolling 12-month figures, significant issues could emerge, particularly as new leases come up for renewal. Increased due diligence on leases and financial structures is now becoming a standard focus for lenders amid rising operating costs and economic pressures.
