ApplePie Capital enters into $180m loan purchase agreement with TowerBrook Structured Opportunities Fund

December 12, 2016

ApplePie Capital, the first online lender solely dedicated to the franchise industry, today announced that it has entered into a $180 million loan purchase agreement with TowerBrook Capital Partners L.P. (TowerBrook) to purchase franchise loans originated by ApplePie over a two-year period. Funding will come from TowerBrook’s Structured Opportunities Fund and a credit facility provided by SunTrust Banks, Inc. The TowerBrook relationship will enable ApplePie to further strengthen its position as a leading provider of innovative growth financing for the franchise industry.

ApplePie simultaneously announced a $16.5 million Series B round, co-led by QED Investors and Fifth Third Capital, the direct equity investment subsidiary of Fifth Third Bancorp. QED Investors follows its previous investments in ApplePie’s Seed and Series A rounds, while Fifth Third Capital is expected to add significant strategic value and open up new opportunities for growth. Previous investors participating in the Series B include Signia Venture Partners, Freestyle Capital, and Prosper president Ron Suber. Also participating in the round is Colchis Capital Management, L.P., a prominent investor in the online lending space.

“At our core, we are a growth delivery system for the franchise industry,” said Denise Thomas, ApplePie CEO and co-founder. “We unlock value for our franchise brand partners by providing capital to their franchisees, which helps brands grow.” Thomas continued, “The investments announced today will allow us to scale and dramatically advance our mission of transforming franchise finance, while providing TowerBrook with unprecedented access to high-quality credits in proven small businesses.”

As part of the agreement with TowerBrook, ApplePie also announced the addition of Tim Morris, former Chief Risk Officer of GE Capital Franchise Finance, as a strategic advisor to the firm. Tim spent over 25 years at GE Capital, a leading franchise lender specializing in financing mid-market operators in the restaurant industry.

“ApplePie is a channel-first specialty finance company that isn’t trying to compete in the open market with other lenders,” said Frank Rotman, founding partner of QED Investors. “By building partnerships directly with high-quality franchise brands and structuring lending products that work for their franchisees, ApplePie benefits from advantages in origination costs, underwriting and product fit, all of which build on each other to create a business model advantage.”

“The solid foundation created by Denise and her team has positioned ApplePie to continue their positive growth trajectory,” said Vanessa Indriolo Vreeland, head of acquisitions and strategic investments at Fifth Third. “Fifth Third’s investment in ApplePie reflects our confidence in their strong management team and their ability to help small business owners secure capital.”

Since it started lending in January 2015, ApplePie has formed partnerships with 40 franchise brands, funded over $50 million in loans, and returned over $7 million in principal and interest to investors. The company’s focus on quality credits is reflected by the financial profile of its borrowers (750+ FICO score; $2M median net worth) and strong credit performance to date.

The franchise industry is a strong and growing segment of the U.S. economy with $45 billion in annual capital demand. According to IHS Economics’ Franchise Business Economic Outlook for 2016, franchise businesses are projected to generate $552 billion in US GDP in 2016, representing 3% of total US GDP, and experience growth of 5.6%, outpacing the 4.4% growth projection of total US GDP. The industry is composed of nearly 800,000 establishments, and employs 1 in 15 working Americans.

The TowerBrook Structured Opportunities Fund (TSO) is an investment fund of TowerBrook Capital Partners targeting structured equity, structured assets and structured debt investments. TSO provides a source of stable and flexible capital for companies that are looking for new pathways to fuel their growth.