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5 Questions You Should Ask Franchisors about Financing

A Franchisor That Isnít Involved In Financing Probably Isnít Selling Franchises!

by Dr. John Hayes

As you continue your search for a franchise to buy, one important aspect may be financing. Whether or not you get that financing may depend on your prospective franchisor! Of course, youíve got to qualify for the financing, but today, franchisors can help expedite loan approvals for their prospective and existing franchisees.

Unfortunately, only a few franchisors seem to understand the new role franchisors must play in franchise financing, so while youíre shopping for a franchise, you must now ask what the franchisor is doing to help line up financing. Lenders now expect franchisors to get involved in the lending process; a requirement that wasnít the case just a couple of years ago.

Impressively, one franchisor has tackled this issue by appointing a senior executive to build relationships with lenders. John Teat is the managing director of franchise finance for Primrose Schools. I recently interviewed him for the Texas Franchise Leadership Tele-Forum. Hereís what he recommends that franchisors do. Find out how well your franchisor meets these criteria!

1. Today, franchisor/lender relationships are absolutely critical. While itís location, location, location in real estate, itís relationship, relationship, relationship in franchise financing. Itís who you know, and the franchisor that doesnít have a network of bank and lender relationships isnít in a position to help franchisees get funding. . . . Who are the franchisorís lenders?

2. The franchisor should set up an initial meeting with the lender and plan to ask questions about the lender and the bank. Learn about the lenderís credit culture. Whatís their ďput thruĒ system like? Lenders are impressed by franchisors who want to know about their needs. . . . What can the franchisor tell you about lenders who will consider your application for funding?

3. Franchisors must ask for the lenderís assistance. Create a team spirit with the lender and work collaboratively to put together a funding plan for your brand. Get the lender involved in your business! Invite the lender to your office; to your conferences. . .  Can the franchisor introduce you to lenders?

4. Once the franchisor has a program in place with a lender, itís important to send the lender only prospective franchisees and existing franchisees that meet the criteria for the program! The worst thing the franchisor can do now is to send the lender a candidate that doesnít qualify. . .  What are the criteria for qualification? Has the franchisor explained them to you?

5. Franchisors must stay on top of the ďput throughĒ system with the lender. Remain involved. The lender will look to the franchisor for help. . . What can you expect the franchisor to do to help facilitate this process for you?

Since 1979, John Hayes has worked in the franchise community as a consultant, franchisee and franchisor. He is the author of several franchise-related books and countless articles that have appeared in media worldwide. Dr. Hayes has served for many years as an advisor to franchisors, franchisees and small business owners internationally. He is the author or co-author of 18 non-fiction books including the Franchise Pre-Investment Checklist, Franchising: The Inside Story, Start Small, Finish Big, You Canít Teach A Kid To Ride A Bike At A Seminar and Get It! and The Secrets of Cultivating the HomeVestors Millionaire Mindset. To contact Dr. Hayes visit FranchiseMastermind.com.

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