“Lending is going to remain choppy for some time,” said Siegel Financial Group CEO Ron Feldman to attendees of the IFA 2011 Annual Convention.
For that reason, franchisors need to alter their approach to helping franchisees secure startup funding and the capital they need to update and expand their businesses, explained Feldman and his fellow Panel of the Pros panelists.
Cooperation has always been a key element of successful franchisor-franchisee relationships, but with new challenges to accessing credit that collaboration is “more important now than ever,” said Grant Benson, Dunkin’ Brands vice president of franchising and market planning.
For that cooperation to be the most effective, the franchisor has to be strong, has to have a good story to tell and has to be able to tell that story well, said Benson. The franchisor also must make sure its franchisee candidates are well-vetted and have a good chance of getting funding. “We’re doing more work to shepherd candidates through the process, so we want to make sure they’re good candidates from the start.”
Another important step franchisors can take to help their franchisees secure funding is to help educate bankers about their company and franchising in general, said FASTSIGNS International CEO Catherine Monson. “Community banks don’t know anything about franchising … you need to educate them and help them understand.”
FASTSIGNS took the extra time and expense of getting a bank-credit report — a third-party analysis of their brand and how it supports its franchisees, said Monson. It provides that report to banks where prospective franchisees are applying for loans to help demonstrate the brand’s value and that it is a solid investment. “We need to be talking one-on-one with the bankers and telling them how we support our franchisees and how we screen potential franchisees before they even get to the point of applying for a loan.”
FASTSIGNS is also “encouraging our franchisees to develop real relationships with their bankers,” Monson explained, to take the bankers to lunch, show them their financials and talk to them about how business is going. That relationship may make the little bit of difference needed when it comes time to try to get an expansion loan one day.
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