Franchise Update Magazine Issue IV, 2012 | Page 15

By Robyn Gault, Vice President of Strategic Accounts, Direct Capital Franchise Group

F

ranchisees face a myriad of
unique challenges in the pursuit of gaining or maintaining market position. There
are the equipment and technology
updates, marketing needs and labor costs, brand reimaging, and
the many opportunities that come
hand in hand with the opening of a
new store location. Though every
situation is different, there’s always
one underlying question – how will
you pay for the necessary projects
while still maintaining the cash flow
that you need to keep your business
growing?

Traditional Financing Options

Historically, franchisees found the
major source of their financing in
just a few places—the local bank,
their own credit cards or perhaps
some smaller loans from friends
and family. Or, if they were lucky,
their Franchisor might be one of the
few offering incentives or financial
support.
Over time, the marketplace for
financing has grown, and franchisees
are turning more regularly to direct
lending partners who have continued to provide loans and financing
even after the banks have tightened
their purse strings.

Financing as a Franchise Need

As a franchisee, in order to succeed
in today’s challenging marketplace,
you’re going to need to consistently
put your best foot forward. According to industry data, a remodeled
restaurant may achieve a nice lift in
same store sales, as high as a 10-15
percent increase to AUVs. These
proven results spark many franchisees to start thinking about their own
remodels, oftentimes much earlier
than they may be required to per
their Franchise Agreement.
There are some unforeseen benefits that result from replacing those
“back of the house” pieces that the
customer might never see, as well.
There are certainly increased operational efficiencies that can come from
more current and advanced equipment, not to mention the possibilities of improving product quality and
speed of service. At the end of the
day, any franchise modernization is
about the franchise brand image, and
staying relevant with the customer.
If you’re not current with the brand
standard, the more likely customers
may be to visit a more current location or another brand entirely. So
where do you turn when you need
help raising the funds to accomplish
your goals?

The Financial Relationship

When it comes to financing, the
franchisor likely already has a plan
in place to help its franchisees get
the financing they need to come
out ahead. The franchisor should
therefore be the first stop for any
franchisee on the hunt for financing.
The majority of franchisors maintain strong working relationships
within the franchise lending community, likely a company like Direct
Capital that is very familiar with the
brand and has an understanding of
the franchise system and business
model. The franchisor will probably have a