British Franchise Association member franchises – do they offer more security during the downturn?
Richard Holden - Head of Franchising, Lloyds TSB Business
No matter what the economic climate, it is of the utmost importance that prospective franchisees thoroughly research the business opportunity they are looking to make an investment in.
They should speak to as many existing franchisees as possible and ensure that they ask the franchiser some challenging questions about the business before signing on the dotted line.
Lloyds TSB views franchising as a key market and is looking to lend to sound franchise business propositions.
Banks with a specialist franchise department, such as Lloyds TSB, can assist potential investors with researching their options.
The BFA (British Franchise Association) also runs regular seminars for franchisees across the UK and publishes a useful franchisee guide.
Clearly, making an investment in a well-established franchise opportunity with a sound trading record that has passed the membership accreditation of the British Franchise Association reduces the risks of the investor.
Having said this, there are risks in investing in any business, and the prospective franchisee must be confident that they have the right skills and the franchise will generate sufficient profits to meet their own commitments.
There are some excellent franchise opportunities available to individuals who are looking to invest their drive, commitment and enthusiasm as well as their hard earned cash. You can research options without obligation at www.SelectYourFranchise.com.
Banks are likely to be much more positive with finance requests from investors in a franchise system that has a strong track record over several years and who are members of the British Franchise Association.
Tags: BFA, British Franchise Association, franchise, franchise opportunities, lloyds tsb, Richard Holden
Banks make profit in recession – can franchise business benefit?
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.
Tags: banks, Barclays, franchise business, hsbc, lending, lloyds tsb, Nat West, nick strong, profit
Business Confidence shows Signs of Revival
Richard Holden - Head of Franchising, Lloyds TSB Business
Richard Holden, Head of Franchise Development at Lloyds TSB shares half yearly Business in Britain survey with Select Your Franchise readers: The survey outlines a positive picture that:
1. Business confidence is rising somewhat from recent record lows
2. Firms are hopeful about sales and orders, but profits are still
under pressure
3. Investment, recruitment and prices remain constrained
4. Strength and shape of the recovery remains uncertain
In all areas including the franchise sector British businesses are showing signs of rekindled confidence in their prospects for the rest of the year, but profits will remain under pressure for some time to come, according to the latest Business in Britain survey from Lloyds TSB Commercial.
The report charts the performance of more than 2,500 franchise and other UK firms and their views on prospects for the coming year. It shows that firms are hopeful of an increase in sales and orders by the end of 2009 but indicates that, without the ability to raise prices, profits will continue to fall for many. In addition, the survey highlights that investment and recruitment plans are still being scaled back.
These signs of greater confidence amongst British firms are rooted on hopes for a boost in sales and orders by the end of the year. The survey’s business confidence index1, which tracks firms’ expectations for sales orders and profits over the coming six months, has risen to a
balance2 of -3 per cent, from the record low of -32 per cent, six months ago.
The balance of franchise and all other categories of firms expecting an upturn in sales has risen to +1 per cent, with 31 per cent anticipating a rise and 30 per cent braced for a fall. This compares to a balance of -28 per cent in the survey six months ago, when only 20 per cent expected a rise and 48 per cent believed there would be a fall.
A similar picture emerges for orders. The overall balance of firms expecting an increase in the next six months has risen to +6 per cent (27 per cent expecting orders to climb and 21 per cent expecting a fall). At the time of the last survey, by way of contrast, the order book balance was -25 per cent, with only 17 per cent hopeful of a rise and 42 per cent resigned to a downturn.
Despite the fresh hopes for sales and orders, profits are likely to remain under real pressure for most firms. Although the balance of firms expecting rising profits has improved, from a low of -42 per cent in the last survey, it is still firmly in negative territory at -16 per cent. A fifth (21 per cent) expect profits to climb, while almost two fifths (37 per cent) believe they will tumble. Two fifths (39 per cent) think profits will remain stable.
A third (30 per cent) of companies reported cash-flow problems – marginally higher than the level recorded in the survey six months ago (29 per cent), with late payments by customers and weak demand remaining the main causes. These constraints on profitability and liquidity will take an inevitable toll on firms’ investment plans for the rest of the year. While one in ten businesses (13 per cent) expects to increase investment over the next six months, a third (33 per cent) believe they will need to make cuts, resulting in a balance of – 20 per cent. This is a slight improvement on the balance of -35 per cent in the last survey, but is also still firmly negative.
There is some improvement in the number of firms expecting to increase staff levels. One in ten firms (11 per cent) plans to recruit during the last six months of 2009, while a fifth (20 per cent) plan to reduce numbers, which is a balance of -9 per cent. Although this is a clear improvement on the balance of -25 per cent in the last survey, it is still a negative balance, meaning that firms are continuing to reduce numbers, albeit at a slower pace.
With consumer and business demand still in the doldrums, firms have little scope, at the moment, to increase prices. Just 15 per cent of firms expect to raise prices over the next six months, while 16 per cent are contemplating cuts – a balance of -1 per cent. Most firms (65 per
cent) say they will keep prices on hold.
The picture is better for exports than it is for the domestic market. A balance of 13 per cent expect overseas orders to increase over the next six months – 33 per cent say exports will rise, 20 per cent believe they will fall and 41 per cent don’t envisage a change.
Business confidence improved in all sectors, with business and other services, wholesale distribution and manufacturing reporting confidence levels above the all-sector average.
John Maltby, managing director, Lloyds TSB Commercial said: “A major factor in the dramatic fall into recession has been plummeting business confidence – and restored confidence is the key to any recovery. So this evidence that firms are regaining faith in their business prospects is good news.
“But the survey indicates a levelling off in the downturn, rather than a return to strong growth. For the time being, profits will remain under
pressure and investment will be on the back-burner. And that means
businesses will need support in order to ensure the momentum of any recovery.
“The somewhat more positive outlook, with growth projected in export markets, means that there are opportunities and we hope that British firms can seize the initiative.
“Banks will play a crucial part in helping firms face this challenge.
Throughout these challenging times, Lloyds TSB remains dedicated to providing solid financial advice and to supporting every reasonable request for financial support. We’re committed to helping UK businesses, not only to survive the recession, but to prosper as the economy recovers.”
- The balance demonstrates the percentage of companies reporting an increase minus those reporting a decrease.
- The Business Confidence Index, which this figure reflects, takes into account order book levels, sales and profit expectations over the next six months.
- The Business in Britain survey has been carried out twice a year since 1992. Responses from 2,564 firms were collated in June 2009.
- Data available by region, sector and company size from the Lloyds TSB Press Office.
