CIT failure would chill U.S. restaurant operators

By Lisa Baertlein

LOS ANGELES (Reuters) - A potential bankruptcy of CIT Group Inc CIT.N would be another blow to restaurant operators and other franchisees by removing yet another funding source at a time when many large banks have frozen lending.

But longer term, analysts say the long-suffering restaurant sector should be able to hunt down alternatives.

"We think long term our people will find other places to go, short term there will be pain," said Matthew Shay, chief executive of the International Franchise Association, which has lobbied the Obama administration to rescue CIT -- one of the largest providers of loans to small businesses in the United States.

"If CIT were to go away, it would take a financing option away from our franchisees who want to buy stores or expand their networks," said Michelle King, spokeswoman for Dunkin' Brands Inc, which is owned by private equity firms Bain Capital Partners, the Carlyle Group CYL.UL and Thomas H. Lee Partners.

Franchisees, whose numbers are dominated by restaurant operators, make up a large percentage of the nation's small business operators.

CIT has provided funding for operators of restaurants ranging from Dunkin' Donuts to Yum Brands Inc's (YUM.N) Pizza Hut.

The lender warned late on Wednesday that government bailout talks had ended, a move that could set the stage for bankruptcy.

But CIT has effectively been out of the market this year, said Craig Moore, president of CiCi Enterprises, which owns and operates 650 CiCi Pizza restaurants in 30 states and does not borrow from CIT.