Skip to main content
search

MCA Supports Restructuring and Exit of Food Service Company

Following the acquisition of a multi-unit franchise operation of a national fast-food brand, the company was struggling to achieve the operating performance levels to fund its operations and perform on its debt obligations. The challenges included staffing shortages, rising costs, declining revenues, and underperforming locations – most of which were occurring in the months leading up to the sale but were not disclosed to the buyer as part of the due diligence process.
The company engaged MCA to provide a range of advisory services in which MCA:
  • developed financial models to evaluate the performance of all stores and identify opportunities for improvement through a detailed cost analysis.
  • assisted with the closure of several underperforming locations, which included leading negotiations with the franchisor and the lender.
  • guided the overall turnaround of the business, stabilizing operations and restoring profitability.
  • led and supported the sale process for the remaining stores.
  • supported the litigation between the company and the seller.
Competing priorities between the senior lender and the franchisor added complexity to the process. The lender was primarily focused on protecting its credit position and maximizing recovery, while the franchisor was concerned with operational continuity, and the collection of franchise fees and royalties. MCA maintained direct and ongoing engagement with each stakeholder, facilitating communication, aligning expectations, and navigating through the friction.

Stabilized Operations, Negotiated Settlements, and a Successful Exit

Despite the complexities, MCA successfully negotiated mutually acceptable settlements for the lender and franchisor, enabling each to exit the situation on agreed terms. Client expectations were met as MCA successfully supported the restructuring and exit of the underperforming business without the need for additional capital from either the shareholders or lender. As a result of the sale process and settlement negotiations, the client was able to resolve its obligations with the senior lender at the fair market value of the assets.

The success of the engagement was driven by the MCA team’s combination of financial and operational knowledge in the restaurant industry together with restructuring and forensic accounting expertise. Key capabilities included advanced financial modeling and cash flow analysis, which enabled a detailed assessment of store-level performance and identification of cost-saving opportunities, evaluating store closures, stabilizing overall business performance, and positioning the company for a successful sale. In addition, the team brought significant experience in creditor and stakeholder negotiations, which proved essential in navigating complex discussions with both the franchisor and the lender.

Financial acumen and negotiation expertise are essential for navigating distressed M&A situations with multiple stakeholders. Contact MCA Financial Group to learn how our advisory professionals can provide clear, evidence-based insight.

Fast-food Franchise
Close Menu