In recent years, many of the largest restaurant brands in the United States have utilized securitization techniques to secure financing, specifically in the form of a “whole-business” securitization of franchise royalties and (to the extent included in the transaction) company-owned store revenues and other related assets both nationally and internationally. In such transactions, an originator or owner entity transfer its interests in certain revenue generating assets, principally the existing and future franchise agreements relating to the franchised business, to one or more wholly-owned, bankruptcy remote, special purpose entities. The special purpose entities then issue one or more series of notes in a privately-placed transaction and pledge the contributed assets to secure payment obligations on each series of note.
King & Spalding has been at the forefront of this area of financing, counseling structuring banks, purchasers, originators, owner entities and issuers in securitization transactions, drawing upon the expertise of professionals at King & Spalding across multiple practice areas, including finance and securitization, restructuring, intellectual property, tax, employment and regulatory.
Over the summer, members of the King & Spalding Franchise & Hospitality team closed three “whole business” restaurant securitizations for nationally-recognized restaurant brands. In a transaction that closed on June 26th, our team represented a major international investment bank as the sole structuring advisor and sole active book-running manager in a $210 million securitization of the franchise assets of the Church’s Chicken brand. On June 27th, our team closed the Five Guys Burgers and Fries transaction, a $400 million first-time securitization of franchise royalties and company-owned store revenues, in which our team represented Five Guys Enterprises LLC as the Manager and Five Guys Funding, LLC as the issuer. Finally, on July 7th, our team represented a major international investment bank as the sole structuring advisor and sole active book-running manager in an $800 million securitization of the franchise assets of the Jimmy John’s Gourmet Sandwiches brand. These three deals followed a number of other securitizations in the restaurant industry in 2017 in which our team participated, including the TGI Friday’s and FOCUS Brands transactions.
“Whole business” securitizations, can be a valuable financing tool for companies in the restaurant industry and King & Spalding is committed to providing high-level commercial legal advice to our trusted clients
