The Winner's Column - March 2012

Editor's Note: Franchising is seeing a flurry of activity in financing, mergers and acquisitions, and franchisee incentives in 2012, especially for returning veterans. Combine that with ongoing signs of a spring thaw in the lending freeze - and what appears to be a steady (though uneven) economic recovery - and the Winner's Column presents a special focus on capital availability and incentives.

As more troops return home and search for jobs, franchisors are setting their sights on recruiting the best among them - making for some great deals and once-in-a-lifetime opportunities - for both the vets and the savvy franchisors seeking new, motivated, and qualified candidates to help them expand their system.

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BoeFly and IFA To Collaborate on Credit Access Initiatives
BoeFly and the IFA have announced a strategic alliance to jointly develop and conduct educational programs focused on credit access for franchise businesses. BoeFly's online matching technology, Franchise Solution, connects borrowers with multiple lenders from its more than 1,500 participating banks and is used by more than 100 brands, including Dunkin' Donuts, Carl's Jr., Express Personnel, and Kiddie Academy. In addition to the educational programs, BoeFly and the IFA will jointly create a monthly "Franchise Lending Index" to provide greater visibility into the volume and demand for small-business lending. BoeFly also will develop and publish two research reports based on its own small-business request and lender profile data. BoeFly also became a sponsor of the IFA's VetFran program.

Merchant Cash and Capital Opens Franchise Financing Division
With the promise of streamlined underwriting, higher approval rates, and increased funding amounts, Merchant Cash and Capital has opened a new franchise financing division. In exchange for a share of future credit card sales (merchant cash advances) the division will provide a lump sum to franchisees to help finance expansion plans. Repayment schedules are matched with daily credit receipts, so the repayment amount adjusts with business volume. One bonus for MCAs compared with traditional loans: they're usually approved within days, making them a viable option for short-term working capital.

Massage Envy Franchisees Can Tap $15 Million from FAF
Franchisees at Massage Envy will have access to an additional $15 million in development capital in 2012 for new development, as well as for existing franchisee expansion. The funds are available through a lending program developed by Franchise America Finance (FAF). Since its franchise lending program began in April 2010 to help counter the lending freeze, FAF has allocated more than $400 million for franchisee financing for member franchise systems, says Ron Feldman, CEO of FAF. "We funded approximately $5 million to Massage Envy franchisees in 2011, and have an additional $10 million in the funding process today. There is a total of $25 million allocated for Massage Envy franchisees so far," he said. In 2011, Massage Envy added 87 new locations (a 13 percent increase). Founded in 2002, Massage Envy has 750 locations in 44 states, with an AUV of $1 million.

Jamba Announces $6 Million Credit Agreement
In February, Jamba, Inc. announced a $6 million credit agreement with Wells Fargo Bank. The agreement expires on January 31, 2013. Also in February, Jamba Juice Company (a subsidiary of Jamba, Inc.) acquired Talbott Teas, a Chicago-based boutique, premium company. "Talbott Teas is part of our strategy for growth through the acquisition of lifestyle brands that fit well with the Jamba brand and our positioning as a leading and wellness company," said James White, chairman, president, and CEO of Jamba Juice. Talbott Teas was founded in 2003 by Shane Talbott, former owner of the Troupe salon and spa in Chicago and stylist to the stars. Jamba Juice Company, founded in 1990, has 750 locations in the U.S. (307 corporate and 443 franchised), as well as 19 international locations.

Temporary SBA 504 Refi Program Ends in September
Under the Small Business Jobs Act, the SBA has implemented a program--authorized until September 27, 2012 - allowing small businesses to refinance eligible fixed assets in its 504 program without requiring an expansion. The program (which began accepting loan applications on Feb. 28, 2011, with a start date of Oct. 12, 2011) offers borrowers a chance to lock in long-term stable financing, finance eligible business expenses, protect jobs, and hire additional workers. Details and FAQs are available on the SBA website.

Garbanzo Mediterranean Grill Lands Funding for National Expansion
Garbanzo Mediterranean Grill, a 14-unit Colorado-based chain that started franchising last year, has signed a funding deal with Gemini Investors, a private equity firm based in Wellesley, Mass. Alon Mor, Garbanzo's CEO, said that in exchange for investment capital to help the company expand nationwide, Gemini is taking an equity stake in the brand, but did not disclose details. In 1999, Gemini was part of the original round of investors in Buffalo Wild Wings. The firm also held a controlling stake in Wingstop Restaurants, which it exited in 2010. Garbanzo was formed in 2007 by Mor and Ken Rosenthal, founder of St. Louis Bread Co. and Panera Bread. Mor says the company plans to open 5 to 10 new company units and 6 to 8 franchised units this year, primarily in the Northeast.

Veteran (and other) Incentives

Valpak Debuts New Veterans Incentive Program
Valpak Direct Marketing Systems has announced a new incentive program to support returning U.S. military veterans seeking to start a Valpak franchise. Valpak will waive start-up fees for qualified, honorably discharged veterans, making it easier for them to start their franchise business and receive at no direct cost - an estimated $32,500 in savings. Qualified applicants will be able to acquire a Valpak territory with no franchise and training fee (regularly $17,500). In addition, the territory fee for the first three Neighborhood Trade Areas (NTAs) will be waived; as the market grows, additional NTAs can be opened at a 50 percent discount. The offering is a part of "Operation Enduring Opportunity," a program developed by the IFA. Valpak, owned by Cox Target Media, a subsidiary of Atlanta-based Cox Media Group, has nearly 170 franchises in the U.S. and Canada.

Cici's Pizza Launches Two Incentive Programs
CiCi's Pizza is offering two incentive programs, one targeted toward returning veterans. Through the CiCi's Patriot Program, the company will waive its franchise fee for the first and offer a 50 percent royalty fee reduction for the first full year in operation for all qualified, honorably discharged U.S. veterans, a saving of approximately $58,000. Veterans enrolled in the program are required to hire a manager who also is an honorably discharged veteran, and CiCi's will support the veteran franchisee in obtaining their CFE designation through the IFA. CiCi's has also agreed to support Sprigster's "Boost a Hero" crowd-funding program (see next item).

In March, CiCi's unveiled its new Franchisee Investment Program, allocating $5 million to help qualified new franchisees with the necessary funds to open a minimum of five restaurants. Under the program, CiCi's will invest $100,000 per restaurant toward development and become a non-voting minority shareholder. After certain financial milestones are met, CiCi's will roll over the initial $100,000 into the development of a second until all the contracted restaurants have opened.

CiCi's also announced it plans to continue its Build the Brand growth initiative to add 500 new restaurants by 2020. The Coppell, Tex.-based chain, which opened its first restaurant in Plano in 1985, has about 600 restaurants in 35 states.

Sprigster Introduces Crowd-Funding Program for Veterans
Sprigster, an online crowd-funding platform focusing on franchising, unveiled its "Boost a Hero" program to help returning veterans raise the capital to become a franchisee. Sprigster introduced the donation-based program in the VetFran Pavilion during the IFA's annual convention in Orlando. "While veterans have access to discounted franchising fees, they often don't have the initial start-up investment needed to open most franchise businesses," said Sprigster CEO Mark Mohler. Qualifying veterans can register for the program at Sprigster's website.

KidzArt: Free Franchises for 10 Veterans and 10 Teachers!
KidzArt is giving away 20 free franchises, 10 each to veterans and teachers. Applicants must be over 21 and legal U.S. residents. Requirements of the Franchise Giveaway program include an interview, the ability to attend training in Jackson, Miss., for five days, and $3,500 available for working capital to launch the business. In addition to waiving the $9,900 franchise fee, KidzArt is offering a protected territory, a web page, a $500 online class registration system, $1,000 off all start-up marketing services, complete business and and ongoing franchise support. Founded in 1998 and franchising since 2002, KidzArt has franchised units in the U.S., China, the Middle East, Indonesia, Thailand, Canada, India, Singapore, Malta, the Philippines, and South Korea.


Comfort Keepers Unveils Financing Program for New Franchisees
CK Franchising, Inc., franchisor of Comfort Keepers, is offering a new incentive plan to help qualified franchisees get started. Under the new financing program, the franchise fee ($42,000) can be financed with a 25 percent down payment ($10,500) with the remainder paid over 30 months at 6 percent interest. "With 75 percent of the franchise fee financed, entrepreneurs can now easily get into the booming business of in-home care, owning one or multiple Comfort Keepers territories," said Jim Brown, VP of franchise development for CK Franchising. Founded in 1998, Comfort Keepers has 642 franchises in 47 states. In August 2009, CK Franchising was acquired by Sodexo.

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