KBRA Releases Research Report on Whole Business Securitizations

According to a Kroll Bond Rating Agency survey focused on structured finance, more than 80% of publicly traded restaurant chains, including all of those who have issued whole business securitizations, are at least starting to explore online delivery options, with most partnering with delivery aggregators like GrubHub, DoorDash, UberEats, Postmates and Amazon Prime Now Restaurants.

Although online delivery likely carries lower margin than in-restaurant sales, KBRA thinks that most restaurant brands have little choice but to jump on the bandwagon. Those who lag behind may find it increasingly difficult to engage with younger consumers and retain market share.

Overall, KBRA views the trend toward delivery as a positive for whole business noteholders. Any large capital expenditures, including the upfront costs associated with developing a digital delivery platform, are borne by the franchisor, while the franchisees bear the costs associated with using third-party aggregators.

Since cash flow to the ABS trust is from franchisee royalty payments, based on a percentage of sales, the increased revenue from online delivery should increase cash flow to the ABS trust, supporting healthier debt service coverage and leverage ratios.

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Terry Mulreany
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