The franchisor of the popular Mellow Mushroom pizza joints just got a bigger piece of the money pie thanks to a $25 million credit facility from GE Capital.
Given the tight-fisted credit markets, almost any sort of leverage is news these days. So it’s remarkable that Atlanta-based franchisor Home-Grown Industries of Georgia Inc. landed a five-year senior term loan of $21 million and a $4 million revolving credit facility.
“Frankly, I was surprised that we were able to get this deal done on a senior debt basis,” said Lawrence M. “Larry” Gold, the Carlton Fields partner who represented Home-Grown. “I give credit not only to the company but also to [investment bank] Croft & Bender for finding someone like GE Capital who was willing to finance this without a mezzanine piece and without an equity piece. That’s tough to do even in good economic times.”
(For those of you not versed in deal-speak, a credit facility is simply a loan or collection of loans or letters of credit taken on by a corporation; senior debt is debt that merits priority repayment in the event of a liquidation; mezzanine financing is, generally speaking, a hybrid of debt and equity-based financing; and pepperoni is--oh, never mind. Do you really wanna know?)
Gold, who has represented the franchisor in various capacities for about three years, said the deal came together extremely quickly—in just six weeks—because GE Capital, represented by lawyers from Kutak Rock’s Denver office, wanted to book it in the third quarter.
Several factors influenced Home-Grown’s ability to get the loans, according to Gold. The privately owned company, he said, is extremely well run and franchises are one type of business lenders still are willing to finance.
Also, it had very little senior debt—between $5 million and $6 million—and it increased profits even in the down economy.
Gold explains the profit increase by quoting Mellow Mushroom CEO Richard Brasch: “Even in tough times, people eat pizza and drink beer.”
Brasch, reached at his office, amended that quote a little, saying, “Actually, people eat pizza and probably drink more beer, depending on how tough times are.”
And they do so at more than 100 Mellow Mushroom franchises, most of them in Georgia, North and South Carolina, Tennessee, Alabama and Florida.
As for Gold, he praises his client’s ability to provide value for the money, saying: “Their pizza’s not the cheapest, but it’s good, and that’s a value proposition that works.”
His favorite slice is topped with tomato sauce, cheese, mushrooms—and a smidge of onion.