Reprinted with the permission of the Restaurant Finance Monitor
“It was not a question of whether or not to lend to John, but how to get it done and help him grow his operations,” said Adnan Assad, SVP and leader of the franchise group with Byline Bank.
Byline Bank recently funded the recapitalization of seven Popeyes restaurants in Puerto Rico for Brodersen Management, owned by franchisee John Brodersen. The restaurant company owns 19 locations on the island.
Byline Bank SVP Mike Chin, who led the transaction for the bank, knew Brodersen’s attorney, who mentioned that his client was frustrated with his banking relationship because they didn’t know much about the franchise business.
“We were stuck between two models,” said Brodersen. “Our local bank in Puerto Rico was an asset-based lender that didn’t understand cash flow lending, while our U.S. banks didn’t understand the island.” Over the years growth had not been a problem for Brodersen, as his asset base included over 90 restaurants in seven different states. But in 2022, Brodersen sold all his domestic restaurants, retaining just the real estate.
In Puerto Rico, “I knew we could do a better job for him,”said Chin. It helped that Byline’s President Alberto Paracchini and Executive Chairman Roberto Herencia are from Puerto Rico. In fact, prior to Byline, they were both executive leaders at Banco Popular, which is headquartered on the island.
Chin arranged a meeting with the Byline executives and Brodersen. “John got comfortable when he knew that our executives understood how business is done in Puerto Rico,” said Chin.
Indeed, business is done quite differently in Puerto Rico. Byline had to line up both U.S. and Puerto Rico attorneys to work on the transaction—four of them. “It’s a U.S. territory, but you have to follow Puerto Rico laws,” said Assad.
“It’s more of a manual process, which takes longer,” he said about business development there. “Real estate is hard to find and obtain. When you do, permits and project approvals are needed, and you need to hire an attorney to track the title or the mortgage, which is a ‘live instrument.’ All of this adds time to perfecting your position on a property.”
Assad and Chin traveled to the island for the closing and worked with Brodersen’s current bank to obtain documents needed for the loan. After the process was finished, Brodersen agreed that most U.S.-based lenders would have given up before they even started on the deal.
A lot of franchise operators faced headwinds in 2022, Chin explained, and the financial analysis was based on ’22 numbers. “Yes, 2022 was an anomaly, but we had confidence in John as an operator. We did a deep analysis on 2023, with food costs coming down and less labor headwinds.”
John wanted a bank that understood the value of his Puerto Rican assets and was willing to collateralize them for future growth in Puerto Rico and the States. He said he is ready to “get back in” and is looking at some U.S.-based acquisitions.
For Byline, financing Brodersen “was a great deal for us as we continue to elevate our franchise initiative,” said Assad, who added that they are focused on top-tier QSR brands. “We want to expand into other concepts on a national scale, and we’re looking to grow—especially in the U.S.”
For more information, contact Adnan Assad at (847) 361-7568 or at [email protected]. Or contact Michael Chin at (847) 805-9529 or [email protected].
Read more on the multi-unit franchise business, in the Restaurant Finance Monitor.
