ALLIED BRANDS TO FUND FRANCHISING WITH US CAPITAL
Written on the 9 February 2010
REBRANDING capital obtained from the US will assist the publicly listed franchisor Allied Brands to expand its profit margin on new franchises.
New York asset management firm SpringTree Global Investors, is crediting up to $4.9 million of its special operations fund to Allied Brands and its recently established franchising services division.
The Broadbeach company, whose brands include Baskin Robbins, Villa & Hut and Kenny’s Cardiology, will be able to access up to $200,000 per month in capital over the next two years from SpringTree. Initially, the funds will be used to rebrand acquisitions prior to selling them as franchises.
The funding has become available just as Allied Brands announced a $150,000 acquisition of four Coffee Bean and Tea Leaf retails stores, though CEO Shane Radbone says 14 Freedom Home & Cafe stores acquired from Steinhoff Asia Pacific will be the first to see the benefits.
Both recently acquired brands will be rebadged and franchised to the Villa & Hut chain.
“It will cost around $1.5 million to rebrand the Freedom stores to Villa & Hut, however they will sell for $4 million and continually generate $1.5 million each in yearly turnover,” says Radbone.
“Though we are only planning on selling four this year, when they are all sold we would have gained considerable market share without a lot of cost.”
Radbone says the move towards consolidating all the services associated with franchising into one vertically integrated business is what he is ‘really excited’ about.
Allied Brands marks the fourth Australian investment of SpringTree, which provides equity and debt capital to a number of sectors around the world.
As part of the deal, Allied Brands incurred an establishment fee of just over 1 million ABQ shares but can opt to repay the monthly tranches in cash rather than issuing equity.
SpringTree managing director Jeff Easton, says the successes of the other Australian investments were ‘encouraging’ in finalising the credit agreement.
“We have been very impressed with the current management of Allied Brands and the strategic opportunities available in the Australian and international market for the Allied Brands business,” he says.