You’ll get your latte -- just as soon as we get a loan
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How the credit crunch trickles down from Wall Street to your Egg McMuffin breakfast, according to Bloomberg News:
McDonald’s Corp., the world’s largest restaurant company, told some U.S. franchisees to seek other ways to finance store improvements after Bank of America Corp. declined to increase lending. Store owners have exhausted financing used to pay for upgrades and equipment to make lattes and espressos, and Bank of America won’t provide more money as it works on the planned purchase of Merrill Lynch & Co., McDonald’s said in a memo that was obtained by Bloomberg.
The story notes that the interruption in financing may be just a hiccup as BofA figures out how much of an overlap it has with Merrill Lynch in providing financing to McDonald’s franchisees. BofA agreed to buy Merrill on Sept. 14.
In the memo, McDonald’s said it was ‘identifying new sources of liquidity and loan programs for our franchisees’ and expected to make announcements within weeks, Bloomberg said.
Neither BofA nor McDonald’s would comment for the story. The fast-food titan’s shares fell $1.41 to $62.57 on Monday. They’re up 6.2% this year, compared with a 17.8% plunge in the Standard & Poor’s 500 index.
McDonald’s is betting on the addition of frappes, smoothies and bottled beverages starting in mid-2009 to turn the chain into a ‘beverage destination,’ Bloomberg noted, quoting Chief Operating Officer Ralph Alvarez from a recent conference.
Glendale-based DineEquity Inc., which franchises IHOP and Applebee’s restaurants, also had been victimized by the credit crunch this year.
DineEquity had been hoping to pare down its heavy debt load by selling many company-owned Applebee’s stores to franchisees, but the credit crunch is making it harder for Applebee’s franchisees to get financing, as noted here.