Sterling Franchise Propulsion Facilities
(SFPFs)
From good recipes to stratospheric IRRs
Capitalizing on excessive fragmentation efficiently
1. Restaurants as part of a portfolio
- Volatility: High cyclicality and seasonality
- Elasticity arbitrage: Brands are more elastic than the industry
- Idiosyncratic risk: Fixed income, downside protection, and fuel for operational velocity
- The mispriced value: Under the right capital structure, restaurants are the perfect hedge against household debt
- What we do differently: The additional elements contained in an SFPF dilute economic and operational risk while amplifying its upside potential
2. SFPF-v1: Underlying asset
- Extreme upside potential: Heavily discounted equity
- Quasi-linearity: Fixed income grants protections and guarantees part of the return
- Cheaper failures: Optionality wipes out the cost associated to execution risk
- Simplicity: Sponsor manages operational complexity and absorbs fiduciary duty until exit
- Expected IRR: 50%, horizon: 3 to 5 years
3. SFPF-v2: Your investments
- Hyper-localized indices: Gain exposure to neighborhood-level economic activity
- Total return swaps: Capital efficient exposure
- Volatility swaps: Disproportionately advantageous pricing on long positions
- Synthetic CLOs: Exposure to credit events across SFPFs of your choice
- Bespoke contracts: On-demand
4. Our customer base
- SFPF-v1: Private equity funds, special situations funds, other accredited investors
- SFPF-v2: Hedge funds, macro funds, pensions, derivative desks, other institutional investors