While discussions over the potential cap structure and leverage remain fluid, incumbent lender Fifth Third is offering staple financing to support a possible leveraged buyout, sources noted. Fifth Third is one of several banks with franchisee expertise that is aiming to finance the deal.

Direct lenders are eyeing the deal as well, sources said. However, regulated bank lenders may have an edge in the process given their lower cost of capital and willingness to push leverage beyond usual levels for attractive franchisee assets, the sources noted.

The auction is currently in the second round, with bids coming mainly from private equity sponsors, according to sources. Far West is currently owned by foodservice-focused investor CapitalSpring.

In general, sponsor exits have been few and far between this year as sellers are reticent to test the market during a period of depressed valuations. However, sources noted that Far West is hoping to take advantage of its steadily improving financial performance, and is commanding attention from a wide range of private equity firms and lenders given the dearth of other assets for sale.

Far West’s strong results have been driven in large part by how well the company has navigated inflationary pressures relative to its peers, one source noted.

“Chicken prices have been extremely volatile and Far West has done a better job managing their costs,” the source said.

The chicken chain bills itself as one of the largest franchisees in the Wing Stop system with locations in Southern California, Colorado, Nevada and Washington.

Far West, CapitalSpring, North Point and Fifth Third did not respond to requests for comment.