Lane Cardwell

Looking for Clues

When I was in the eighth grade I sent off for a book on the universe by the World Book Encyclopedia that I saw advertised in a magazine. It said that it was free and that “no salesman would call.” They weren’t kidding, either. The salesman didn’t call; he knocked on the front door. He was a little disappointed when he saw that I probably wasn’t a qualified prospect, but that didn’t keep him from trying to convince my mother to buy a set for me. Hold that thought.

I attended the Restaurant Leadership Conference in Scottsdale two weeks ago. It was as good as always. It was packed with speakers covering industry issues and related topics. The overall mood of the restaurant operators who were in attendance was disbelief that our sales slump and cost pressures are showing no signs of relief. Since these two facts are written about enough to get the point across that these are tough times, I couldn’t think of anything worth writing about on the conference.

Then I saw the announcement on April 11 that GE had suffered a bad quarter due to its financial services division. GE Capital Solutions is the founding sponsor of the Leadership Conference. GE has been, and still is, very active in the franchise finance arm of our industry. They make a lot of other loans to franchisors, but this conference is their way of connecting with the franchisees who supply so much of the growth in our industry.

One of the best things about attending the conference is that GE publishes a book with a comprehensive analysis of the factors affecting our industry. Kimberly Savilonis, and her team of analysts, devote an extraordinary amount of time and effort preparing this document for the attendees of the conference. Many will say that the book alone is worth attending the conference. It used to be given out early in the conference, but many slackers, with book in hand, would leave the conference before it finished. They then began giving it out at the conclusion of the conference so that people would stay.

Remember my World Book Encyclopedia opening? Apparently, someone else in GE did too. The book was no longer available at the conference but would be given to you by your GE Franchise Finance representative. The plan was not to give them at the conference, but during an appointment with your rep.  I had never seen so many angry people. I was lucky. I begged Kimberly and was able to read it on the plane.

So what’s the point of all this? The finance community is constantly looking at the restaurant industry for clues as to whether our businesses are going up or down and whether or not they should invest or loan money to them. I believe that the restaurant industry can do the same thing with the finance industry. I believe that the actions of GE regarding their Chain Restaurant Industry Review book are a clue. 

In attempting to marry it to a meeting with your representative (I didn’t know that I had a representative) I believe that GE is showing signs of having money to lend, but no one wanting to borrow. When that is the case, terms and covenants can become more negotiable. Rates can become more favorable. Loan limits can grow. I don’t know if I am right or enough, but the clues seem to be there. Check it out. 

Posted by Lane Cardwell on April 13, 2008 | Comments (0)