| Example 2

FRANCHISE CONSOLIDATION | SPONSOR FINANCING

FRANCHISE CONSOLIDATION

  BACKGROUND

• Seasoned operating partner of a large QSR franchisee required financing to support the acquisition of 30 units, resulting from the break-up of a prior partnership
• Capital need was in excess of what traditional lenders would provide and also included follow-on capacity for future acquisition opportunities
• Operator had limited equity yet desired a non-dilutive capital solution, where he would own nearly all of the business

---

  OUR SOLUTION

• CapitalSpring provided a one-stop financing solution that allowed the operator to fully separate from his existing partner and then quickly double the size of his business through an add-on acquisition
• Our comfort in the operator allowed us to underwrite on pro forma EBITDA, despite high going-in leverage, and provide flexible terms for quick deleveraging and ultimate take out with conventional bank debt
• CapitalSpring Value-Add
  • Sourced and provided follow-on financing for multiple add-on acquisitions
  • Supported new unit growth with customized build-to-suit financing
  • Enhanced operations through mystery shops, detailed 4-wall benchmarking, and improved back office processes

Example 1 | Example 2

FRANCHISE CONSOLIDATION | SPONSOR FINANCING

FRANCHISE CONSOLIDATION

  BACKGROUND

• A leading private equity firm required committed financing for the acquisition of a substantial franchisee within a large full-service brand
• The Company had a proven management team, a history of solid financial results, and an exclusive development agreement with ample whitespace
• Buyer’s preference was for a subordinate lender with i) a knowledge and comfort level with restaurants, ii) a working relationship and form inter-creditor with the chosen senior lender, and iii) a willingness to allow future debt incurrence to fund remodels and new development

---

  OUR SOLUTION

• CapitalSpring worked quickly to underwrite the transaction, issuing a hard commitment letter within several weeks, and ultimately provided a mezzanine loan with a “silent” second lien on collateral and market inter-creditor rights
• Our comfort with the credit and aggressive advance limited sponsor equity contribution to 27%
• CapitalSpring Value-Add
  • Sponsor leveraged CapitalSpring’s due diligence assessment and Strategic Operations Group’s unit economic analysis
  • Acted as a sounding board on select remodel and operational items post-closing

Example 1 | Example 2

FRANCHISE CONSOLIDATION | SPONSOR FINANCING

  BACKGROUND

---

  OUR SOLUTION

  BACKGROUND

• Proven operator of a multi-brand family dining franchisee with ~40 units and a track record of leading SSS growth
• Operator previously owned a separate QSR business that became insolvent during the recession, resulting in personal bankruptcy and meaningful legacy liabilities straining the business
• Situation required a lending partner to look past temporary complexities in the business by leveraging existing cash flow and to close on an expedited timeline

---

  OUR SOLUTION

• CapitalSpring provided an interest-only 4x unitranche financing that offered satisfactory payment to creditors through a court-approved bankruptcy plan and a capital structure that allowed the operator to focus on running the business
• 60 day close from term sheet execution
• CapitalSpring Value-Add
  • Crafted court-approved reorganization plan and supported negotiations with creditors’ committee
  • Worked with operator to devise and execute post-closing sale-leaseback strategy that led to additional unit development

  BACKGROUND

---

  OUR SOLUTION

  BACKGROUND

---

  OUR SOLUTION

  BACKGROUND

• Rapidly growing fast casual brand required non-dilutive development capital to accelerate new unit openings and double the store count in 18 months
• The Company had ~25 established units and best-in-class unit economics
• Management desired a capital partner with deep industry expertise that could provide strategic guidance and lend against pro forma EBITDA from new units and normalized G&A

---

  OUR SOLUTION

• CapitalSpring provided a minimally-dilutive debt and warrants financing to fund aggressive new unit growth
• The Company received a large development line commitment with a pro forma run-rate incurrence ratio to fund future development
• 45-day closing from execution of LOI
• CapitalSpring Value-Add
  • Worked with management to refine and improve new store analytics, including introduction to leading technology vendor
  • Supported menu engineering, procurement, and labor optimization, and advised on deployment of new cooking equipment
  • Guided brand / consumer elements and portioning / value positioning

  BACKGROUND

---

  OUR SOLUTION

  BACKGROUND

---

  OUR SOLUTION

Example 1 | Example 2 | Example 3

BUYOUTTRANSACTION | PARTNERSHIPRECAPITALIZATION | DIVIDENDRECAPITALIZATION

BUYOUTTRANSACTION

  BACKGROUND

• A ~20 unit family dining brand with 60+ year history was put up for sale by family owners who sought liquidity for estate planning
• The Company had strong unit performance and brand equity in the region
• The seller owned multiple restaurant real estate properties that needed to be acquired in parallel

---

  OUR SOLUTION

• CapitalSpring designed a comprehensive offer that allowed the sellers to interface with a single buyer for both the operating company and real estate with no financing contingency
  • Back-stopped sale-leaseback financing for real estate properties
  • Single source financing for the operating company purchase
• CapitalSpring partnered with a proven external management team to drive meaningful 4-wall improvement, while maintaining a commitment to the Company’s culture, history, and employees
• CapitalSpring Value-Add
  • Implemented new leadership and elevated existing employees
  • Optimized restaurant operating processes, menu, and marketing
  • Updated and professionalized above-store support center
  • Developed new unit prototype and accelerated opening pace

Example 1 | Example 2 | Example 3

BUYOUTTRANSACTION | PARTNERSHIPRECAPITALIZATION | DIVIDENDRECAPITALIZATION

PARTNERSHIPRECAPITALIZATION

  BACKGROUND

• The owner of the largest franchisee in a leading fast casual brand desired a partial liquidity event by engaging an outside equity partner
• The Company was an entrepreneurial, family-owned business with a strong culture that the owner did not want to upset
• Given ongoing family ownership and involvement, the focus was on finding a strategic financial partner with a deep understanding of the restaurant industry and capability to support the next phase of growth while not interfering in daily management and operations

---

  OUR SOLUTION

• CapitalSpring delivered a one-stop mezzanine and equity solution that provided significant liquidity to the key shareholder while preserving meaningful post-close ownership in a ~50/50 partnership
• Family members & management maintained autonomy to operate the business
• CapitalSpring Value-Add
  • Active strategic involvement on Board
  • Advised on credit agreement negotiations with third party lenders
  • Acted as sounding board on operational and new development issues
  • Identified real estate arbitrage opportunities in existing lease portfolio

Example 1 | Example 2 | Example 3

BUYOUTTRANSACTION | PARTNERSHIPRECAPITALIZATION | DIVIDENDRECAPITALIZATION

DIVIDENDRECAPITALIZATION

  BACKGROUND

• Owner of ~60-unit QSR franchisee desired liquidity for estate planning purposes but was hesitant to seek a full exit of his business
• The Company operated strong stores in a core brand territory with SSS growth outpacing the system
• There was also a desire to consolidate existing disparate credit groups and lender relationships across multiple entities to unlock additional debt capacity

---

  OUR SOLUTION

• CapitalSpring provided a unitranche solution through 6.0x that consolidated operations under a single loan with a flexible structure to support future acquisition activity
• The owner received a ~$30M special dividend and maintained 100% ownership in his business
• CapitalSpring Value-Add
  • Acted as strategic partner to owner by assessing growth opportunities
  • Sourced acquisition opportunity in a contiguous territory and advised on divestiture of select units in non-core markets
  • Assisted in optimization of back office functions through recommendation of in-sourced solutions
  • Ongoing financial backer and source of creative capital to fund growth