Cathryn Hayes - HSBC Head of Franchising

Bank finance has generated significant interest during the past two years in the wake of the financial crisis.  ‘Supporting UK Businesses’, published on 14 October by the Business Finance Taskforce in association with the British Banking Association (BBA), aims to address the concern that banks are not adequately supporting viable businesses.

Noel Quinn, Head of HSBC UK CMB said that the report, “Is a significant milestone for UK businesses and we fully support the recommendations.  Our lending position has not materially changed during the past two years and, compared to many competitors, our strong balance sheet has meant we have remained open for business throughout the financial crisis.  That said, it’s also important to recognise that we must do all we can to responsibly support businesses.  These recommendations are therefore a further positive step for all UK businesses and will help under-pin the UK’s recovery.”

The Business Finance Taskforce includes representatives from six UK banks, government and a number of trade bodies.  In July, the Taskforce agreed to review the support banks provide to small and medium sized businesses and ensure UK businesses have access to secure and sustainable sources of finance.

The report makes 17 recommendations, listed fully in the BBA summary and report, which focus on three key areas:

1. Maintaining better customer relationships
2. Ensuring better access to finance
3. Providing better information and understanding

This is obviously positive news for the UK franchising industry and HSBC fully supports the implementation of the recommendations during 2011.

Additional information about the Business Finance Taskforce can be found at: www.bba.org.uk/taskforce.

Carl Reader, Dennis & Turnbull Ltd

The Chancellor gave his Budget on 24th March 2010 and the changes announced will affect all franchise businesses.

50% Tax

It was confirmed that the new 50% rate of income tax will come into effect from 6th April 2010 for those with income over £150,000.  Personal allowances will also be restricted for individuals with income over £100,000.

Capital Gains Tax

Capital Gains Tax rates have remained the same.  However, the lifetime limit for Entrepreneurs’ Relief has doubled to £2m for disposals made from 6th April 2010.  The Inheritance Tax nil rate band has been frozen at £325,000 until 2014/15.

Stamp Duty

It was announced that no Stamp Duty Land Tax will be payable by first time buyers on completion of the purchase of homes below £250,000.  This takes effect immediately for 2 years until 25th March 2012.  The rate of Stamp Duty Land Tax charged on purchases of properties over £1m will be increased to 5% with effect from 6th April 2011.

Corporation Tax

There will be no increase in the rates of corporation tax for 2010/11 which will remain at 21% for small companies and 28% for large companies.

Capital Expenditure

There is a boost to franchises purchasing plant and machinery.  The annual investment allowance has increased to £100,000, giving a 100% first year allowance on capital expenditure up to this level.  Any additions over this amount will also receive capital allowances of 20%.  This applies to equipment bought after 1st April 2010 for companies and 6th April 2010 for unincorporated businesses.

VAT

The VAT registration threshold has been increased to £70,000 with the deregistration limit increased to £68,000.  The fuel scale charges have also been increased for periods starting from 1st May 2010.  It is worth noting that payments made by cheque to HM Revenue & Customs will now be treated as being received once the amount has cleared through their bank account and not when the cheque is received.

Business Rates

With regard to business rates the government will fund a temporary increase in the level of rate relief so that small firms occupying properties with a rateable value up to £6,000 will pay no business rates for 1 year from October 2010.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Carl Reader, Dennis & Turnbull Ltd

Franchisees should by now be aware that their Self Assessment Tax Return is due for filing by 31 January of each year, through online filing. The deadline for this is fast approaching and it is essential that this deadline is met to avoid penalties and surcharges.

Sarah Walker of HM Revenue and Customs (HMRC) said: “If you haven’t yet sent in your 2008-09 tax return, you need to start thinking about it now.”

You can file your tax return online at http://www.hmrc.gov.uk, or if you have an accountant they should be able to deal with this for you and ensure that the return is submitted correctly and in time.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Naz Daud - Owner, CityLocal

In today’s unhealthy economy, one can’t help but wonder how small franchise businesses can effectively achieve cash management. In fact, even medium scale and large scale business are struggling to cut back on their expenditure during the current economic situation.

Everyone is tightening their belts, both customers and consumers. Imagine the consequences if no one wanted to purchase goods other than the essentials. What will happen to the restaurant industry? What will happen to the retail industry, particularly those marketing electronics and those gadgets that people can manage without? It’s not just a matter of reducing expenses. Small franchise businesses need to survive and compete with the lower prices that are offered by their competitors, and good cash management is a must.

Here are some tips to help you to save money and manage your business and cash flow. These will also help individuals to better manage their home expenses.

1. Energy Consumption

Electricity is an expense we can’t avoid, but if you are able to keep your energy consumption lower than normal, you can save a fair amount of money. One way to save energy is through the use of laptop computers. Sure, they can be more expensive than desktop computers, but imagine the great savings you’ll get when it comes to energy consumption. A laptop or notebook computer consumes around 90 percent less energy than desktop computers. Most small businesses use computers, and if these are replaced with laptops when the time comes, energy expenditure will be less. The more computers your business uses, the more money you will save.

2. Telephone Costs

The telephone is essential to all small businesses, whether franchised or otherwise, and many use mobiles as well as land lines. Check up on your monthly plan and negotiate a better deal. As competition is increasing, many businesses are stuck on a deal they started off with, and if they renegotiate they can save a lot of money. Use mobiles only where necessary since they are significantly more expensive to use than land lines. Good cash management involves keeping a close eye on communications costs, especially those that are non-essential.

If you use multiple telephone lines in your business, consider VoIP as an alternative. This can allow you to make huge savings, particularly if you have more than one location for your business. Skype offers a completely free service between Skype users, and it is less expensive than normal to phone non-Skype users.

3. Save on Your Ink

Ink for printers can be another expensive item, particularly when calculated over a year. Try to go paperless and print only what is essential. Use recycled cartridges or buy in bulk to save money. Printer sharing on a network can save on the cost of the hardware and also on ink!

4. Save on Lighting

Most people turn off the lights in their homes when they leave the room, but strangely they rarely do so at work. Make a point of doing so. Switching to energy-efficient light bulbs can save a lot of money over a year.

5. Use the Internet

Small businesses should use the internet as much as possible. It is amazing how many tasks can be carried out online, including business calls, sales calls, online business conferencing, video conferencing, live meetings, instant messaging, seminars and so on.

Owning a small franchise business involves almost constant communication with customers, suppliers and other employees. This can be expensive, particularly if it involves travel. It is just as easy to communicate online as by telephone, and video conference is cheaper than a transatlantic flight! Online seminars can be arranged for training purposes, and advertising costs can be slashed through online advertising. Websites are becoming easier and cheaper to put up with every day that passes. The internet offers many opportunities for you to improve your cash management and improve your overall cash flow.

6. Assess your Office Space

Perhaps you have too much office space and you can afford to let some of it out until you have expanded enough to need it. If you are renting, share the rent with another small business that only needs a desk or two.

7. Bulk Buying

A lot depends on your cash flow situation, but it is sometimes cheaper to purchase office items on a quarterly rather than a weekly or monthly basis. This is particularly true if bulk discounts overcome the problem of tying up your capital in stock. You will save on delivery charges, but make sure that you budget the use of such supplies, since there is sometimes a temptation to use more materials or supplies when stocks are higher than normal.

Although times might seem bad, those with the ability and desire to make savings will come through in a much stronger position than small business owners who do nothing. Don’t let that be you, and by following these seven cash management tips for small businesses, you should be able to make significant savings.

Naz Daud is the founder of CityLocal. This Franchise Opportunity is for people who would like to work from home and be their own boss – Read more about the CityLocal Franchise Opportunity.

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.

I attended the British Franchise Association – BFA – National Franchise conference last week.  The event brought together around 150 franchisors and affiliate suppliers. 

The Conference was titled Built to Last – creating stronger foundations for business to prosper.  This conference was influenced by three key factors this year -

1.  The recession and franchise businesses response
2.  Honing the fundamentals of quality franchise business to help ensure long term success
3.  One Vision – focusing on establishing the BFA’s  structure for its future

Recruiting franchisees

There were a number of break out sessions during the conference.  The first one I attended was focused on franchisee recruitment.  Clearly the recession has had an effect on recruitment.  Franchisors reported a slowing of lead flow over the first two quarters of 2009 compared to the same period in 2008.  Many franchisors also indicated that banks are taking longer to agree and release funds for new franchisees.  The result has been a slowing in the number and speed of recruitment.  

Obtaining funds

In 2009 banks have made clear that all franchise buyer’s business plans must be bespoke.   No standard ‘gap filled’ off the shelf busienss plans will be accepted.  This is especially so when it comes to local market research.  The would be franchisee must demonstrate a knowledge of the franchise, the market and the local competition in their business plan.  The findings of the franchise buyer’s report must be reflected in the projected earning predictions included in the plan.  Banks are clearly being banks now.  They require assurance before lending.  Franchisors need to put increased focus in supporting franchise buyers in business plan development before approaching banks for borrowings.

Integrating new technology

I chaired this break out session.  The speaker was Alan Fairclough of Driver Hire.  Alan explained at length and detail how Driver Hire has used bespoke software, hosted remotely to improve the flow and quality of management information though the network.  The outcome for Driver Hire and its franchisees was faster service and invoice times.  The result of this system is a franchisor who is in control of their network, franchisees who are well supported and fast action times in all aspects of business from job processing the invoice generation and collection of payments.

One Vision

The British Franchise Association’s – BFA – one vision document was discussed at length.  The vision is being slowly developed via working commissions.  The commission’s job is to fine tune how the vision, and those it includes, will be managed in the future.  The BFA’s goal is to be the recognised authority on all matters franchising. 

At the present time there is no franchisee representation withing the BFA.  One key goal of the One Vision proposal is to give franchisees representation in the BFA.  This may include membership and board level representation.  How this will be implemented is currently being explored by the commission.

Franchise Awards

On Thursday evening of the conference the franchise awards were held.  The Brand Builder Award was won by Green Thumb.  The Award for Enterprise was won by Home Instead and the British Franchise Association – BFA – Franchisor of the Year award was taken by Countrywide Ground Maintenance.  Congratulations to all who were nominated and that won.

The UK’s business landscape is set for its biggest shake up since the industrial revolution, according to HSBC’s Future of Business report, released at the end of May.

The report, from HSBC Commercial Banking and The Future Laboratory, predicts that the economic downturn, increased emphasis on internationalisation and changing demands on business will profoundly alter the UK’s ‘business map’ as the 21st century unfolds. 

It is forecasting a new regional geography with the birth of five new ‘supercities’ and a map of tomorrow populated by nanotech, cybernetics and a growing emphasis on bio and tech sciences driven by new economic income streams.

According to the report’s authors, the changes are being driven by the recession, which will create an emphasis on interpersonal skills in business; technological advances; the demands of many for new and flexible ways of working; more business trade taking place across international borders, and a rise in entrepreneurship. 

According to the research there will be a new-look UK with business hubs focusing on:

·          Robotics – Edinburgh, Birmingham, Essex, London, Manchester, Plymouth 

·          Biotech – York and Dundee

·          Nanotech – Oxford, Cambridge, Newcastle, Durham, Bristol, London

·          Stem cell research – Edinburgh, London, Cambridge, Liverpool, Manchester

·          Nutraceuticals – Dundee / Southampton

·          Renewable energies – London, Wales, Cornwall, Glasgow

·          Cybernetics – Reading

·          Gaming – Dundee, Edinburgh, Glasgow

The HSBC’s Future of Business report also identifies four new ‘types’ of entrepreneurs that are set to capitalise on the current environment and drive the changing landscape forward.  From transpreneurs (an elite new breed of super-global entrepreneurs with connections and workspaces all over the world) to referral economists (who’ve emerged from the social networking boom, are ‘always on’ and are building businesses on word-of-mouth alone), the report finds these groups are rapidly shifting the way we work and do business in the 21st century.

Noel Quinn, head of HSBC Commercial Banking UK, said: “The face of business is changing and while we are in tough economic times, the HSBC future of business report unveils some positive new trends that could alter the working world tomorrow”.

To download a copy of the HSBC Future of Business report, go to http://www.hsbc.co.uk/1/2/business/info/resources

Quantitative easing is a method of boosting the supply of money.  Its aim is to get money flowing around an economy when the normal process of cutting interest rates isn’t working – most obviously when interest rates are so low that it’s impossible to cut them further.

In such a situation, it may still be possible to increase the “quantity” of money.  The way to do this is for the Bank of England to buy assets in exchange for money.  In theory, any assets can be bought from anybody.  In practice, the focus of quantitative easing is on buying securities (like government debt, mortgage-backed securities or even equities) from banks.

Yesterday the Bank of England announced that it is moving forward with its plan to implement quantitative easing in a bid to kick start the UK economy.  The hope is that by buying up bank securities and increasing liquidity the banks will start lending more freely to UK business.

This is a high risk strategy.  There does not seem to be any contractual obligation on the banks to lend the capital they gain from the sales achieved.  It is also not clear what quality of stock the Bank of England will buy and how fit for future re-sale it will be.

Quantitative easing is clearly not an ideal strategy but it is one that is deemed necessary in a new attempt to inject cash availablity back into the UK economy via the banks. 

How could franchise development benefit from qualitative easing?

It is vital for franchise business to gain access to affordable debt finance.  The government has helped with its new Enterprise Finance Guarantee (EFG) scheme which offers 75% government underwriting of loans to small and medium size business up to £1,000,000.  However, the banks seem to be slow to take up on the EFG in practise. 

The franchise departments of HSBC, RBS and Nat West have recently declared at British Franchise Association forum meetings that they are welcoming approaches from franchisors, franchise buyers and existing franchisees for funding.  The departments concerned are open to all avenues of funding including the EFG according to delegates from the banks.  However, they are stipulating that the quality of all applicants must be high and their business plans very well researched and presented.

Will quantitative easing increase access to debt finance for franchise development? 

Provided that the banks lend the liquid capital they receive from the Bank of England then the answer could be yes.  Business format franchising is proving to be a success for the banks as over 90% of franchise businesses are profitable and loan repayments are usually met in a timely and satisfactory manor.

All involved in UK franchise development are working hard with the banks to open avenues for continued confidence with the franchise sector.  The franchise community is, by nature, a positive one where communication is open between participants.  We are all working towards playing our part in rebuilding confidence, sales and prosperity for the UK economy.  It is hoped that this latest measure, by the Bank of England, will help us all work out of our commercial objectives during this challenging time.

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.

Positive news about bank finance for franchise owners and buyers continues to come from UK banks.  With over 90% of franchise owners declaring profitable trading, and over five times the growth when compared to the UK GDP, it is little wonder that the banks favour the finance of franchise owned businesses.  Stats taken from the Nat West/British Franchise Association (BFA) survey 2008.

The UK property lettings franchise market is one sector that is enjoying favour with bank finance according to Mike Goddard, Chief Executive of Belvoir and BFA Chairman.

According to Belvoir falling property sales continue to boost the rental market and Belvoir, the UK’s largest specialist lettings agency, has recorded an impressive 25% month-on-month increase on its 2008 figures, providing an excellent investment opportunity for prospective Belvoir Franchise Owners.

Chief Executive Mike Goddard, who is also Chairman of the British Franchise Association, says: “We are delighted with these figures.  It is important that everyone is aware of these exciting developments in franchising so that the banks can continue providing their very high standard of service to potential Franchise Owners.”

Banks such as NatWest, RBS and HSBC support investment in franchisesand are happy to arrange financing for prospective Belvoir Franchise Owners who meet their criteria.  Loans of up to 70% are usually available but arrangements can be tailored to meet individual requirements and a decision over financing can be received within 72 hours, and funds released in just six to ten weeks.

Graeme Jones, Head of Franchise for NatWest and RBS says: “The growth of Franchising continues to gain momentum, and the latest NatWest/bfa survey reveals that the industry is now worth a record £12.4 billion.  As the leading banks for the Franchise sector, our network of franchise managers are always keen to talk to good quality franchisees/franchisors to discuss their ambitions for growth.  We would definitely include Belvoir in this category, since it has a very successful and proven franchising concept.”

This news is good for eveyone involved and considering being involved in busienss format franchising who may require bank finance.

 For more information on the Belvoir Franchise Opportunity visit -http://www.selectyourfranchise.com/uk/franchise-features/Letting-Franchise-UK-Belvoir-the-lettings-specialists.html.

For more information about franchise opportunities across all sectors in the UK visit – http://www.selectyourfranchise.com/

To franchise your business visit – www.Franchise-Consultants.co.uk