Credit Crunch Hits Quick-Service Restaurants

This Nation’s Restaurant News report details how GE Capital Solutions is slowing its lending to restaurant-franchise owners. This comes after recent reports (which have been refuted) that Bank Of America is cutting lending to McDonald’s owners that want to make expensive upgrades in their restaurants to add high-end coffee makers, seen as a threat to Starbucks.

Ironically, this could mean good news for Starbucks, which has had its own problems.

But for the overall industry, we doubt this is a good thing, especially since many of the major quick-service chains were relying on their franchisees to buy locations and take the reigns of future expansion plans.

Is that reliance on franchisees likely to change and will we see more companies relying on corporate locations for growth? Or is growth a thing of the past in the sector?

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8 Responses to “Credit Crunch Hits Quick-Service Restaurants”


  1. 1 Sam Timpano September 30, 2008 at 8:47 am

    Hang on folks. This is just the beginning of how things are going to start coming apart in the credit sectors if some plan is not passed and implemented soon.

  2. 2 CubicleDweller September 30, 2008 at 9:44 am

    This is the beginning of the financial version of the butterfly effect.

  3. 3 James September 30, 2008 at 4:26 pm

    Newspapers in this country (excluding the NYT and WSJ)publish articles at about an eighth grade level purposely to communicate with the widest audience. No one from the administration or any independant group has given the American public a simple chalk talk on this so called financial meltdown. There is a tremendous amount of frustration and distrust out there because most people don’t know what they are potentially signing up for. The Bush administration needs to sponsor an objective and educational presentation on national TV on just what they see happening out there and then give some independant non-political experts a chance to present their views. They should keep their political mitts off the presentation and do it even if it takes two hours to get it across, believe me I’ll be watching with great interest.
    A democracy functions on the premise and the presumption of an informed electorate. Set up a power point presentation and give us the straight unvarnished truth. Stop pointing fingers and start apologizing for not doing this earlier. Otherwise the administration and the markets will get the ire and the panic they deserve. I have not seen the American public in such a foul mood in a very long time.

  4. 4 FrugalFran September 30, 2008 at 5:35 pm

    When companies run out of cash, they rely on franchise dollars to carry the day. If franchisees can’t get the money from banks, they’d better have a trust fund.
    Growth is a thing of the past for fast feeders, it usually works when money is loose. Now, each store will need to max out their profitability and sales, or face closure. It’s fairly Darwinian out there.

  5. 5 iritter October 1, 2008 at 8:11 am

    James-
    I particularly liked this article in regard to what you were saying:
    http://www.time.com/time/nation/article/0,8599,1846040,00.html

  6. 6 James October 1, 2008 at 10:58 am

    Ian,
    Very good Time article, thanks, the whole debate about an appropriate course of action would be enhanced enormously by an informed public. The peril here is far too abstract for most people to imagine. If you want the resources of the people to address a problem then give them facts and untainted concepts and allow them to contribute from their perspective.
    Another tenant of democracy involves trusting the people.
    The blogoshere is running something like 80%+ against this bailout plan. These politicians should be afraid, very afraid.

  7. 7 Elizabeth October 2, 2008 at 1:53 pm

    Here is a thought to ponder:

    Could the “sub-prime mess” be a way to nationalize our banks?

    Of course it wouldn’t be announced but it sure is heading in that direction.

  8. 8 Larry J Ortega October 6, 2008 at 11:39 am

    We are making a transition where we source capital. Capital will become available through some traditional and maybe more non-tradtional areas. Unlocking the rules and regulations regarding IRA and 401K investments may become a source. If you do not have a self directed plan, then the opportunity to invest is limited to tradtional stocks and bonds that the pension plans are forced to invest. I would rather lose my money on my own behalf VS letting the handlers lose it for me.

    We might see an opportunity “emerging” in the micro banking trend. It may be that souces of capital can emerge out of individual private lending. Raising capital $200 at a time VS $300,000 from a typical bank loan.

    Regardless, capital will seek a return and we may need to unshackle our Pension plans to provide capital.


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