Cathryn Hayes - HSBC Head of Franchising

Just 14% of businesses in the UK recognise that Asia could drive future opportunities for business, yet a new report commissioned by HSBC identifies that there is huge potential for companies to prosper from the new markets in the East.

Noel Quinn, Group General Manager for HSBC Commercial Banking UK, said: “The UK is no longer looking at when West meets East, but at how the East will redefine the West and the way we do business. By understanding this fundamental and fast-paced change,

British businesses can ensure they are in a position to respond swiftly and effectively; and it is the thinking business that acts now. There is still a high volume of UK firms that just perceive the East as a traditional ‘low cost’ production and labour destination, but there needs to be a shift change in attitude as Asia and the Middle East become the brightest prospects on the global landscape“.

“There is also a massive opportunity for British exporters, Asia is largely positive about British brands and the consumer market is growing rapidly, giving UK businesses a platform to increase their trade. At HSBC, we are seeing export balances up by 45% compared to this time last year, which is hugely encouraging and demonstrates where some of the real opportunities for business growth lie. We have, and will continue to help businesses with the financial tools to take advantage of the opportunities in the East through our unrivalled on the ground presence, knowledge and local expertise.”

‘Looking East: The changing face of world business’ is the first report which identifies the most influential current and future trends in ‘the East’ – and interprets these to define practical implications and opportunities for companies in Europe. It highlights that ‘thinking businesses’ in the UK can proposer by factoring Asia into their strategic thinking, actively addressing how to capitalise on its diverse consumer base, skilled workforce and advances in Research and Development, while mitigating the risks posed by the macro-economic climate.

The research also reveals that many UK companies already doing business internationally are recognising the potential; it shows they are significantly more likely to see the East as a market with an increasingly highly skilled workforce than their non-international counterparts. And international traders are twice as likely to view the East as being a hub for increasingly sophisticated innovation methods.

These opportunities also apply to franchising and we have seen a number of larger companies looking to expand into Asia using the franchising route.  One specific example is  Mama’s & Papa’s who were recently featured in HSBC’s 100 Thoughts campaign.  Their initial decision to expand abroad came from the fact that so many companies were contacting them about a franchise, many after seeing their flagship Regent Street store.

If you feel this is an area you can consider for your franchise, please email HSBC Franchise Unit at franchiseunit@hsbc.com for a free copy of the Looking East report.

• Careful research of the franchise of choice
• Clear understanding and concordance with the franchise contract
• In-depth local market analysis by the prospective or exiting local franchise owner
• Local competitor analysis and how that may affect sales and profit predictions
• Declaration of available investment capital
• Personal assets to use as security against the loan
• A good credit history with no CCJ’s
• A commitment to follow the franchisor’s proven system
• Backing from your family in the commitment of franchise business building
• The bank recognise your chosen franchise as efficient and effective from its own indpendent research.

Against the above items the bank will decide the level of funding it will provide to the business builder.

Visit the following links for free business planning software -

http://www.hsbc.co.uk/1/2/business/info/resources

http://www.rbs.co.uk/business/banking/g2/planning.ashx

Visit – www.SelectYourFranchise.com and www.Franchises.UK.com for information about franchises for sale in the UK. 

Franchise business plan inclusions

Below are some tips for finding the right franchise for you.  The tips will also help you determine if  in-fact franchising is right for you or not.

Tips for finding the right franchise for you

2.  Speak to your family and explain your thoughts about wanting to build your own business.  Make sure that the people that will be most affected by any change in your employment status understand your motives.  Make sure that your family will support you emotionally and if possible financially.

3.  Recognise that business is hard work and can have its ups and downs.   Happily franchise business is all about replicating proven best practise so this minimises the downs and maximises the ups.  It is vital therefore that you want to FOLLOW a proven system. 

4.  Visit information rich sources such as www.SelectYourFranchise.com and franchise exhibitions where you can research information about franchising and genuine franchise business options that are of interest to you.

5.  Arrange to visit the franchise systems that are of most interest to you.  Meet the key people that would train and support you.  Do you like them?  Could you work with them?  Does the visit create confidence in you?

6.  Ask for contact details of their franchisees.   Speak to the franchisees and ask about their experiences.  You could ask questions like, are you happy with the franchise?  Are your profitable?  What support do you get?  How has the recession effected your sales and profit?  Knowing what you know, if you were me would you buy the franchise?

7.  After you have completed your research identify which franchise opportunities are of genuine interest to you.  Make a short list.

8.  It is vital now to speak to your bank.  Ask the bank for a report of what they know about the franchise systems of interest to you.  The banks keep their own records of all franchise busiensses known to them.  From this information you can gain an independent report about the bank’s view of your preferred options. 

9.   If you need to borrow money banks will often lend up to 70% for a proven franchise concept.  This is because over 90% of UK franchisees run profitable businesses according to the British Franchise Association National Franchise Survey which gives the banks a lot of confidence to lend to first time franchise business owners.

10.  Finally you will need to look closely at the franchise contract from the system you have identified to move forward with.  This document governs the trading agreement between you and the franchisor.  A British Franchise Association accredited lawyer should be consulted.

When you have completed the above steps you will be in a position to decide what franchise is right for you.  It will then fall to you and the franchisor to sign contracts, pay fees and set up training and your franchise business launch programme.

Take your time, find the right franchise for you and work with the franchisor and your customers to build your own successful business.

Nick Strong - Franchise recruitment advisor

At the beginning of August Barclays have announced profits for 2009 at nearly £3 billion pounds. 

Across the group, Barclays income has soared 37% to £16.3bn, more than enough to absorb a rise in bad debts caused by the worst global recession since the 1930s.

Because other banks have suffered more from the recklessness of their lending and investing, Barclays has been able to expand its share of the market.

But although Barclays managed to survive last autumn’s banking crisis without a direct injection of capital by taxpayers, and it wasn’t semi-nationalised like Royal Bank of Scotland and Lloyds, it has benefited from significant loans and guarantees from the public sector.

HSBC profits from gobal trading are down half but the bank has still made £5 bn profit during the current recession.  HSBC gained from record investment banking profits of $6.3bn during the first half of the year.

Franchise business benefit from bank lending

Clearly the gains made by the banks at present focus around the investment banking sector.  So can franchise business benefit from the recent profit strengthening of the banking sector?

The key benefit that franchise business offers to banks is its stability and trading success.  Over 90% of franchise owners run profitable businesses according to the most recent British Franchise Association/Nat West  National Franchise Survey.  This is good news for lenders as successful repayment of loans is high.

The franchise department departments of the leading banks, that includes HSBC, Lloyds TSB, Nat West and RBS, have announced at British Franchise Association meetings that they have capital to invest in franchise business development.

The key fact to note is that banks are looking at lending to franchise business owners with far more scrutiny in 2009.  The franchise brand and new outlet business plan must be robust and well researched to achieve funding offers from the banks.

To research franchise businesses for sale visit – www.SelectYourFranchise.com.

Nick Strong - Franchise recruitment advisor

At a recent meeting of the Affiliates of the British Franchise Association I attended the bank representatives expressed the importance of writing a robust franchise business plan.  All bank representatives including those from RBS, NatWest,  HSBC and Lloyds TSB franchise departments agreed that funds for buying and growing a franchise are available. 

All bank representatives stressed that the business plans submitted by franchisors or franchisees must demonstrate clear understanding of the market they are in and how competition and the current economic climate might effect trading projections.

In addition to the franchise business plan the banks will look closely at the performance of franchise owner accounts it holds.  This information gives a strong reflection of how the system is doing over all and does help the bank to decide whether to offer funding or not.

Banks look more favourably on a case by case basis where a franchise system has been accredited by the British Franchise Association (BFA).  The BFA exists as a standards body primarily to protect would be franchise owners from franchise systems that lack the robustness to support franchisee businesses.

Franchise business planning software is available from the banks -

Most franchisors will help their franchise owners to prepare a business plan.  They do this because they understand their system better than anyone else.  The franchise owner should do their own homework and demonstrate ‘ownership’ of their own franchise business plan.  Using the free software below can help you prepare.

http://www.hsbc.co.uk/1/2/business/info/resources

http://www.rbs.co.uk/business/banking/g2/planning.ashx

The chancellor is to quiz bank bosses over how much they charge small firms for loans, saying he is “extremely concerned” their rates may be too high.

Alastair Darling said the cost of loans seemed to have risen, despite the UK’s record low base interest rate of 0.5%.   He said that “banks had a duty to restore lending levels, saying the government did not rescue the banking sector “out of some charitable act”. He has called a meeting with bank executives in Downing St on Monday.

Some good news is that banks are using the new Enterprise Finance Guarantee scheme to help small and medium size franchise business to start and grow.

Even though bank charges will ideally come down the use of the EFG is good news for everyone thinking about buying and building their own franchise business in the UK.

Under the EFG scheme the government will guarantee 75% of any loans made, with the bank covering the remaining 25%. The guarantees will mean that the government, or taxpayers, will pick up three-quarters of the the tab for any bad loans.

In total, the Enterprise Finance Guarantee Scheme will see the Government provide £1 billion of guarantees to support to £1.3 billion of bank lending.

Enterprise Finance Guarantee Scheme – details

• The Enterprise Finance Guarantee will apply to loans, and can also be used to convert existing overdrafts into loans to enable businesses to free up their current overdraft facilities to meet working capital demands.
• The Enterprise Finance Guarantee is available to businesses with an annual turnover of up to £25m. Firms can apply for loans of up to £1m for a period of up to 10 years.
• The guarantee will be available through the following high street banks; Barclays, Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, RBS/Natwest and Northern Bank. It will become available from other lenders if they wish to apply.

If you are considering buying a franchise or want access to additional capital to build your existing franchise business I would advise you to contact the franchise departments of the above mentioned banks.

Mr Darling also reiterated that VAT will definitely return to 17.5% from the current 15% level at the end of the year. The rate of VAT was reduced to 15% on 1 December 2008 to help boost retail sales.

This is my 100th franchise blog post.  It has been great to sit down every other day and comment on what is happening in the UK economy and to pitch my views and insights on behalf of the UK franchise market.

Over the past six months we have seen an extraordinary period in British economic history.  The end of 2008 borough shock and dismay with the banking crisis.  Uncertainty reigned on every area of business.  Would customers still buy goods and services?  How would margins to protected?  How could franchise brand owners and their franchisees raise business development capital from a broken financial sector?  These and many other questions dominated franchise industry thinking at the transition of the year.

As we have moved into spring of 2009 confidence seems to be slowly returning.  The housing market improved in May with an increase of housing stock value of 1.2% reported by the Nationwide Building Society.  Banks have confirmed that they have capital to lend to franchise businesses and are heavily using the EFG – Enterprise Finance Guarantee scheme - to fund franchise start ups and business development capital requirements.

2009 is proving to be a time where much culling of businesses that have run on thin margins during the good times is taking place.  On the positive side strong franchise busiensses are becoming stronger by focusing on improving effciancy and productivity in every area of its businesses.

There is now, and in reality never was, any place for complacency in business.  Well managed franchise businesses are quickly becoming stronger than ever before.  This is great news as businesses that are well managed and profitable in the slow times will fly as the economy improves. 

The recently released British Franchise Association and Nat West national franchise survey confirms that UK business format franchising continues to grow in spit of the recession.  I am looking forward to commenting further on the twists and turns of the economy during 2009.  UK franchising is remaining robust in current times.  This is great news for franchisees, their customers and the UK economy.  Our community have over £12 Billion to contribute to UK GDP and is a massive employer via franchisee businesses.  More to come soon and thanks for visiting and reading my blog.  Your comments are very valuable to me.

While the media and public rage against the large bank payoffs that seem to be rewarding failed executives, the franchise departments, of the leading lending banks in the UK, are keeping their focus on helping franchise businesses lend and grow.

Attendees from HSBC, RSB and NatWest franchise depatments have all assured delegates at British Franchise Association forum meetings this year, that their departments are very much open for business and lending.  However, the banks are making it quite clear that any approach for lending will met with a cautious eye.

Banks are now, more than ever, requiring a very robust business plan to support franchise lending requirements.  The business plan, provided by the aspiring franchise buyer to the banks, must demonstrate the buyer’s understanding of the franchise, market and local competition.  The plan must support any income prodiction claims with clear local research evidence.  Off the shelf business plans provided by franchisors will almost certainly be knocked back by the banks.

In addition the banks look very closely at the frachisor.  What is the bank’s relationship with the franchisor and its franchisees?  What is the current and historic financial performance of both franchisor and franchisees from the banks own experience?  British Franchise Association membership helps but is not the only criterion being considered by the banks when considering leanding to franchise buyers.

The franchise department’s of the banks are working with the governments new Enterprise Finance Guarantee scheme – EFG –  that replaces the Small Firms Loan Guarantee scheme.  Via the EFG, lending can be provided by the banks,  and underwritten by the government.  Sums available are up to £1,000.000 under the EFG scheme.  However, the banks must agree to award capital under the EFG and at least 25%  of the franchisee’s capital requiremnts must be provided or secured by the franchisee..  For more information, provided by the HSBC franchise department visit – http://www.selectyourfranchise.com/franchise-blog/?p=401.