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Loan pricing and terms reflect healthier market conditions for large and mid-sized players

New York, December 4, 2020 – Financing for restaurant franchise operators in the large and middle-tier segments has mostly bounced back to what it had been before the onset of the COVID-19 pandemic, according to Brian Geraghty, head of Restaurant Finance at Mitsubishi UFJ Financial Group (MUFG).

A resurgence in rent-adjusted leverage

“In the U.S. we see loan terms and pricing that are as aggressive as they were prior to the full-blown health crisis that came into view in late-March,” Mr. Geraghty says, adding that banks have reverted to accepting a higher leverage profile among borrowers for financing. “We see franchisees’ rent-adjusted leverage ratios back to 5.75 after tightening by roughly three-quarters of a turn—to 5.0—during the spring of 2020.”

Rent adjusted leveraged (RAL), also known as lease-adjusted leverage, is the ratio of debt to EBITDAR (or earnings before interest, taxes, depreciation, amortization and rent costs). Restaurant lenders evaluate the RAL of their borrowers, many of which do not own their properties but rather lease them.

Rise in M&A and franchise purchases

Mr. Geraghty cites recent momentum in merger-and-acquisition (M&A) activity in the quick-service and fast-casual market categories of the restaurant industry, which are defined as establishments offering quick, inexpensive dining with limited preparation and customization, no seating hosts, and no alcoholic beverages.

“Recent restaurant acquisitions in these market categories highlight the substantial amount of readily available capital for deployment,” he says. “Financial buyers, in particular, see investment opportunities in large and mid-sized restaurants that are surviving the pandemic, proving the resilience of their business models, and able to provide portfolio diversification as consumer-facing outfits.”

Mr. Geraghty also points to an upswing in the valuations and frequency at which franchise establishments are changing hands. “In the mid-sized segment, we see a greater number of franchisee purchases at high prices, which indicate to us the desire of owners to enter into this space or expand their foothold,” he says.

Lessons learned from the pandemic

Mr. Geraghty notes that restaurants have emerged from the pandemic with valuable learning experiences that are helping them improve efficiency, enhance customer service and economize.

“The changing economics of quick-service and fast-casual restaurants have led many to shift their focus to drive-through and take-out offerings, and to invest in the technological infrastructure that enables them to field online orders,” he says. “All the same, casual-dining, family-dining and fine-dining establishments, which rely more on table service, are facing greater challenges.”

MUFG is one of the world’s largest financial institutions by assets, with approximately $3.3 trillion.1

About Mitsubishi UFJ Financial Group, Inc.’s U.S. Operations including MUFG Americas Holdings Corporation

The U.S. operations of Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world’s leading financial groups, has total assets of $339 billion at September 30, 2020. As part of that total, MUFG Americas Holdings Corporation (MUAH), a financial holding company, bank holding company, and intermediate holding company, has total assets of $164 billion at September 30, 2020. MUAH’s main subsidiaries are MUFG Union Bank, N.A. and MUFG Securities Americas Inc. MUFG Union Bank, N.A. provides a wide range of financial services to consumers, small businesses, middle-market companies, and major corporations. As of September 30, 2020, MUFG Union Bank, N.A. operated 348 branches, consisting primarily of retail banking branches in the West Coast states, along with commercial branches in Texas, Illinois, New York, and Georgia. MUFG Securities Americas Inc. is a registered securities broker-dealer which engages in capital markets origination transactions, domestic and foreign debt and equities securities transactions, private placements, collateralized financings, and securities borrowing and lending transactions. MUAH is owned by MUFG Bank, Ltd. and Mitsubishi UFJ Financial Group, Inc. MUFG Bank, Ltd., a wholly owned subsidiary of Mitsubishi UFJ Financial Group, Inc., has offices in Argentina, Brazil, Chile, Colombia, Peru, Mexico, and Canada. Visit or for more information.

About MUFG

Mitsubishi UFJ Financial Group, Inc. (MUFG) is one of the world’s leading financial groups. Headquartered in Tokyo and with more than 360 years of history, MUFG has a global network with over 2,700 locations in more than 50 countries. The Group has over 180,000 employees and offers services including commercial banking, trust banking, securities, credit cards, consumer finance, asset management, and leasing. The Group aims to “be the world’s most trusted financial group” through close collaboration among our operating companies and flexibly respond to all of the financial needs of our customers, serving society, and fostering shared and sustainable growth for a better world. MUFG’s shares trade on the Tokyo, Nagoya, and New York stock exchanges.

Visit for more information.

(1) As of September 30, 2020, at the exchange rate of USD=¥105.8

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