Help with Franchise Funding
Brian Duckett - Chairman, The Franchising Centre
Most well established franchisors, whose own business and the business of its franchisees have successful track records of operation, will usually make the franchise sections of the major banks aware of their franchise offering. The banks then take a view on whether or not to lend to new franchisees for that system in principle, and they then put in place a procedure for the franchisor to introduce candidates to them.
The most important part of the process, once the franchisor has satisfied themselves that a candidate is likely to be able to run one of its franchises and has sufficient collateral to obtain the required funding, is for the franchisee to complete a business plan, usually with some guidance from the franchiser or a third party, and submit this for the bank to consider.
Even if you don’t need to borrow money to acquire and run your franchise, it’s a good idea to discuss your proposed venture with your bank because they can get a view on the system in question from their franchise Section. It may be that they wouldn’t lend on it anyway – in which case that’s a warning to you to steer well clear.
Brian Duckett is Chairman of The Franchising Centre with over 30 years experience in the franchise industry. The Franchising Centre helps and supports potential and existing franchisors. Click here to find out more.
Tags: brian duckett, business banking, finance, franchise, funding
Escape the downturn by converting a business to a franchise
Brian Duckett - Chairman, The Franchising Centre
In my last article I looked at converting a business to a franchise. Now we can look two more ways to convert a conventional business to a franchise to improve its chance of success.
The second type of conversion franchising is where a franchisor persuades a competing conventional business to convert to its brand and system.
At first sight, one might wonder why this would be attractive to an independent business owner. The reason often is that there are many who are good tat the day-to-day operation of the business, but not so good at the creative process of marketing or development systems. They may also not have the time to research new ways of doing things, When they join a franchise all the background services are provided and they can get on with serving customers which is often what they do best.
So what is the third type of conversion that I suggest franchising should get more actively involved in.
The franchise sections of the bank specialising in the sector still claim, despite the economic downturn, that they are keen to lend to franchisees, not least because it is far safer than lending to independent star-ups. We have all heard that more than 50 per cent of independent business start-ups will not survive more than three years, whereas the failure rate for franchisees in properly-structured systems is less than five per cent per year.
A bank manager recently told me that he had opened more new business accounts this year than in the same period last year, probably because more people are losing their jobs and looking to take control of their own destiny.
But if these independent start-ups fail, why let them open a business account in the first place?
Why don’t bank managers, Business Links, and others to whom people go for advice when starting a business try to convert these people to franchising by at least suggesting they consider it as an option? This would result in much less heartache, many fewer failures, and greater franchise growth.
It is no good leaving it to the BFA. We should all be making sure that advisers know the franchising story. We should all be “Proud To Franchise” and contribute to its development.
Brian Duckett is Chairman of The Franchising Centre with over 30 years experience in the franchise industry. The Franchising Centre helps and supports potential and existing franchisors. Click here to find out more.
Franchising your business could help you survive the economic downturn
Brian Duckett - Chairman, The Franchising Centre
Converting an existing business to a franchise can give yourself a better chance of weathering the economic downturn.
Many established businesses, some with tens of outlets, some with hundreds, or even one with thousands, are currently exploring the advantages of converting some, or all of them, from company managed outlets to franchised. In doing so, the costs and hassles of the day to day operation of the business are transferred to the franchisee who may be the previous manager, but is now more motivated to operate it more profitably because it is their own business.
One of the biggest benefits of conversion franchising is that it provides the franchisor with a team of motivated business owners, who will be dedicated to growing their own business for the personal reward it offers.
The assumption is that they will be more enthusiastic and energised than an employed manager, whose only financial interest in the business is the salary it provides.
Time and again our clients have demonstrated that almost as soon as a branch converts from managed to franchised that within weeks sales go up and running costs go down. When you consider the business often has the same manager (now running it as his own business), and is in the same premises with the same stock and staff, franchising can, and does, have a miraculous effect on a branch that may have previously have been only marginally successful.
Customer service usually improves because a franchisee is more likely than an employee to go the extra mile. Costs such as cleaning go down because the franchisee does it himself, and staf often rally down to support their new employer as they feel they are no longer just a small cog in a big corporate wheel.
The franchisee takes control of the business, providing yet another benefit to the franchisor. Not only does he take responsibility for sales, but also deals with all the administration and employment hassles, leaving the franchisor to get on with running the core business, developing new products and services and promoting the brand for the benefit of all concerned.
In my next article I will outline a two more forms of conversion franchising…
Brian Duckett is Chairman of The Franchising Centre with over 30 years experience in the franchise industry. The Franchising Centre helps and supports potential and existing franchisors. Click here to find out more.
