Multi-Unit Franchisee Magazine Issue II, 2015 | Page 16

The franchise business is an expensive one.
As a franchisee, you already know that opening up a new store can cost anywhere from
$50,000 to $5 million depending on your industry. But then there are the ongoing costs
of training, advertising, insurance, and other
fees. It becomes increasingly important in this
line of work to have access to the capital you
need with as few barriers as possible.

Finding the time to do everything necessary to maintain a successful franchise is one of the biggest challenges
franchisors and franchisees both face. There is an easy
way to overcome the obstacle of time and that, according to Christian Faulconer, CEO of Franchise Foundry,
is by, “Lining up proper financing and the right team.”
While finding the right team is up to you and your
staff, lining up financing should be a weight off your
shoulders. You need a financing team, product, and
package that serves it like you serve it – fast, easy, and
affordable.
Richard Henderson, Vice President of Franchise Financing at Direct Capital says, “Franchisees are seeking
quick and easy access to capital at attractive rates and
terms to deliver on burdensome, but critical, obligations
to upgrade technology and remodel, as well as to strike
quickly as acquisition opportunities present themselves.”
That’s why getting access to that capital shouldn’t be
difficult. In order to run a successful franchise business, you don’t always have time to navigate a long and
involved credit approval process. When you want to
open a new restaurant, remodel your existing restaurant, or replace equipment or technology, you want to
do it now. This means you need a funding process that’s
smooth and expedient, and a financing partner that
knows your business.
So how do you choose a lender? Henderson recommends that you first look for a “reputable lender before
you need one. Do your homework and find one who
can provide references from happy franchisees in your
brand with whom they have worked. Prior customers
should attest to the lender’s speed, ease, flexibility, and
attractive terms.”
But why? Chances are, if you are not facing a mandatory equipment upgrade or remodel today, you will
be soon. As more and more competition faces the franchise market, CMOs and CTOs are increasingly looking
to cutting edge technology upgrades to gain an edge.
Henderson says that today’s POS and POP technology,
for example, can provide an incredible competitive advantage. “Today’s point of sale and point of purchase

systems ‘get to know’ consumers and automate the
cross-sell/up-sell process while easily integrating with
mobile payments providers, marketing applications,
ecommerce software, and loyalty programs.” Having
a lender that understands the value of acquiring these
systems and is eager to lend to lend you the money to
do so is a crucial first step.
Once you feel confident that you have found a lender
who is suited to supporting your financing requirements,
ask yourself if their ease, speed, and affordability is up
to your standards. You need to always be focused on
what you do best: serving your customers and building
your business. Your lender should handle the rest. Ask
them to explain what is involved in the loan application
and funding process. Does it seem fast and easy? Ask if
you can speak to a representative directly if you prefer
a one-on-one relationship. If they give you options to
customize your experience to best suit your needs, you
will feel better and more confident that you have made
a good choice.
Then, you need to discuss with that lender your specific
needs because building a relationship with your financial
lender is crucial to your success. In your world, making
your business thrive is a priority and your lender is a
big part of helping you achieve that. Henderson adds,
“A reputable lender understands the unique needs of
your franchise system, is willing to gain an in-depth
understanding of your business and your long-term
goals, and should be more than happy to do all of the
‘heavy lifting’ involved in the application and funding
process for you. Many service providers tend to forget
who works for whom!”
Lastly, when your lender presents you with terms,
consider them carefully. This includes evaluating and
selecting payback options, understanding the true all-in
rates offered, and considering how the payments fit in
with your cash flow. Much like your lender did, you also
want to make sure you can handle all of the terms of the
finance agreement. Don’t dig yourself into a hole. Get
the financing you need, but do it on terms that make
sense for your budget.
Henderson says, “Look for a lender who helps you
comfortably match debt service with cash flow so completing projects requiring financing doesn’t create an
unreasonable burden on your business in the future.”
Whether you are brand new at the franchise business, or have been at it a long time, with these steps in
mind, carefully selecting a financing partner will be a
breeze. Just remember: Speed, efficiency, and building
relationships are the three pillars of a one-in-a-million
franchise financing strategy.

ARTICLE SPONSORED BY DIRECT CAPITAL

muf2_ad_direct capital(14-15).indd 14

3/16/15 1:35 PM