Franchise Financing: BankUnited

Headquartered in Miami Lakes, Florida, BankUnited has nearly 90 banking centers throughout the state, making it one of the largest financial institutions in the market. For businesses in the region, BankUnited has become a go-to lending partner for growth financing in a variety of industries. For franchisees, BankUnited’s Bridge Funding Group offers dedicated franchise financing options, including packages for acquisitions, new builds, refinances and remodels.

We talked to Richard Riecker, Senior Vice President of Bridge Funding Group, to learn how BankUnited approaches franchise financing and why it’s one of the most reliable lending options for experienced franchisees.

How does BankUnited help franchisees secure financing for new franchise investments?

Riecker: We provide financing to franchisees for most business purposes. We finance acquisitions, refinances, new builds, remodels, refreshes — really anything a franchisee might need cash for so they can grow their business. As a franchisee tries to build a profitable business, we can be partners for nearly every facet of their growth strategy.

Does BankUnited work directly with franchisors at all?

Riecker: The majority of our business comes from franchisees, who we build very strong relationships with. That said, we do get to know the franchisors. Doing so gives us a better understanding of how the brand is operating and allows us to get a heads-up about initiatives the brand may have coming up, like new growth markets, remodels, and other plans that present opportunities or require financing for franchisees.

We attend most of the conferences for the brands we work with. We also make trips to franchisor headquarters. Most franchisors will have Lenders Days, where they bring all their lenders in and talk about the business and its financial strength. So that’s always a good opportunity for us to get to know the brand and get ahead of any future initiatives and opportunities.

What do you look for when vetting franchisees for financing?

Riecker: Really, the most important thing we are looking at is the potential borrower’s history in their segment. As a general rule, we like them to have three-plus years of experience in the concept that we are being asked to finance. Ideally, that experience will be with the same brand we’re being asked to finance. We want to review three or more years of operating history so that we can see what kind of operator the candidate is. We will review their history against the brand’s standards and the rest of the franchisee space. Additionally, we want experienced operators — people who have three or more units. We don’t work as much with startups and people who are brand new to the industry.

How do you vet brands?

Riecker: The vetting process for brands is fairly complicated, but in a nutshell, there are two key aspects: credit and business.

When we are looking to get into a new brand, we have to understand what the potential business opportunity is. We want to know how many franchisees are in the system, how many of them are three-units and above, what kind of financing a given store needs and what kind of remodels coming up.

In terms of credit, we want to know how strong the franchisor and concept are. We want to know how long have they been in business, how they have grown, what their growth projections are and what their store closure rates and transfer rates are.

What does BankUnited bring to the table for franchisees over loan options?

Riecker: There are a lot of lenders out there, and they all kind of do the same thing within their segment. Our biggest advantage is our expertise. We have an extremely experienced staff in every corner of our operation.

We know the industry inside and out, which is a big advantage for borrowers. We hear from borrowers all the time about their experience with other lenders and how frustrating it is to have to spend their time educating the lender on their business and segment. Our expertise allows us to cut through all of that and provide first-hand insight.

Are you seeing any changes in the way the franchise industry is approaching financing?

Riecker: We have seen a lot of brands consolidating. So the larger, more experienced operators are gobbling up the less experienced operators. But the biggest thing we’re seeing is the franchise finance space becoming increasingly competitive. Right now there are far more lenders than ever before, so borrowers are emboldened and are using leverage for better terms than they used to be able to get. Part of our job is educating the borrower on the downsides of that strategy. Any financial event can affect the borrower’s leverage, and we are likely to face a financial event in the near future. That’s why we stick to our knitting. We don’t stretch our parameters, and that’s how we can survive an economic downturn. Our strategy allows us to be a partner to our borrowers in the long-run. We aren’t going anywhere