Finance

Franchise development executives know that a high percentage of their future franchisees will require debt to purchase a franchise unit. Even the multi-unit franchisees that so many brands tirelessly chase will leverage their equity capital with debt. Franchisors need to 1) understand how and when the franchisee debt requirement affects the franchise development process, and 2) what actions they can take to achieve their desired outcomes: sell more units, achieve faster openings, and stop investing time into subpar prospects.

The role of financing in the development process
The franchise development process is often described as a funnel. Franchise leads enter into the wide mouth at the top of the funnel, and as the funnel narrows fewer and fewer leads remain until a limited number of franchisees emerge from the its narrow end...

Franchisors who have achieved a certain level of success naturally begin to think about the next phase of their company's growth and development. Simply observing others who have gone through the various stages of growth, however, they will see there are many ways to fall short of their objectives.

Of the myriad potential trouble spots a franchisor may face, none is more devastating and pervasive in its impact than a loss of confidence in the brand in the capital markets. At the same time, nothing can have a more positive impact on a company's ability to fuel its growth with the capital it needs - when it needs it - than enjoying a favorable view from those capital markets.

In my experience, there are several elements that enable a company to gain and maintain a high level of confidence among early-stage investors, financial institutions, private equity firms, or the public markets...

In this era of tight and uncertain franchisee financing, savvy franchisors are working hard to provide more options for finding startup capital for new franchisees and growth capital for existing franchisees.

In October, Hurricane Wings & Grill announced an agreement with Mount Pleasant Capital to make available $10 million in financing for new and existing franchisees. The new financing will provide new franchisees with up to 75 percent of the funds necessary to open their location, and up to 85 percent for existing franchisees to grow or remodel.

"Our goal was to add one more program to things we already were doing to assist our franchisees," said Mike Lubitz, CFO at Hurricane Grill & Wings in West Palm Beach, Fla...

Franchise finance is bursting – not busting – out all over, with a flurry of activity in financing, M&A activity, and IPOs. With ongoing signs of a steady thaw in the capital markets, and private equity firms unloading cash by loading up on franchise brands (especially restaurants), we present a monthly focus on the deal-making, consolidation, and reorganization taking place in franchising in 2012. To be considered for next month, please send your news to eddyg@franchiseupdatemedia.com.

Argonne Capital Buys 50 More Applebee’s
Argonne Capital Group LLC has acquired 50 franchised Applebee’s Neighborhood Grill & Bar restaurants in Florida. The deal follows last year’s acquisition by Argonne of 40 Applebee’s units in the Atlanta area...

Franchise candidates need easy access to capital. Many candidates who were "slam dunks" to get financing in the past are now receiving rejection letters and are faced with the prospect of trying to finance franchise opportunities through internal funds or with help from friends and family.

During a Franchise Update Leadership & Development Conference, Darrell Johnson, CEO of FRANdata and former "blue suit and power tie wearing" member of the banking community, predicted lenders are going to be as concerned with the potential match between the candidate's skills, background, and experience to successfully run the franchise venture as they are with the candidate's ability to repay the loan.

Franchisors with higher loan defaults than their competitors may wake up one morning and find their franchise candidates and existing franchisees completely cut off from raising start-up or expansion capital...

Franchising is bursting (not busting!) out all over this spring, with a flurry of activity in financing, M&A activity, and franchisee incentives. Combine that with ongoing signs of a thaw in the capital markets and private equity firms unloading cash by loading up on franchise brands (especially restaurants. This new column presents an ongoing focus on the deal-making, consolidation, and reorganization taking place in franchising. To be considered for next month’s newsletter, please send your news to eddyg@franchiseupdatemedia.com.

Finance

Denny’s Establishes New Five-Year, $250 Million Bank Credit Facility
Denny’s has entered into a new five-year, $250 million senior secured bank credit facility, composed of a $190 million term loan and a $60 million revolving line of credit...

As savvy franchise companies continue to flourish in a volatile economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.


New Units & Deals

Yogurtini Self-Serve Frozen Yogurt Opens in Phoenix
Yogurtini Self-Serve, a pay-by-the-ounce, self-serve fro-yo franchise, has opened its newest location in North Phoenix, its sixth unit in Arizona, where the brand is based. The "serve-yo-self" concept allows customers to make their own frozen yogurt creations, creating blends and concoctions (like a martini, thus the name)...

Zig Ziglar once said, "People don't buy drills, they buy holes."

Carrying his logic into franchising, franchisees don't really invest in franchise opportunities; they invest in the future they are designing for themselves and their families. They buy the next chapter of their lives. Whether you are selling multi-million-dollar hotel investments or home-based businesses with low entry costs, franchise candidates are investing in a perceived solution to a personal problem.

Most franchise candidates invest in franchises for reasons that have nothing to do with business. They only appear business-oriented to the mediocre or underperforming franchise recruiter who is not skilled enough or doesn't care enough to ask the necessary probing questions to uncover what is really driving the candidate...

As savvy franchise companies continue to flourish in a volatile economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.


New Units & Deals

Sears Retail Franchises Signs Two 14-Store Deals
Sears Retail Franchises, which franchises two concepts (Sears Home Appliance Showrooms and Sears Appliance and Hardware), recently signed two multi-unit deals, each for 14 stores. The first 14-store deal is with Sacramento-based Marlu Investment Group, a 73-unit operator of Arby's, Church's Chicken, Jack in the Box, and Little Caesars...

As savvy franchise companies continue to flourish in a volatile economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.


New Units & Deals

Pollo Campero Debuts New Design in Houston
Pollo Campero will open three Houston locations by year-end featuring its new design and menu. A fresh salsa bar will remain at the center of the restaurant's layout, said Roberto Denegri, president of Pollo Campero USA. The revamped design will also feature a patio for outdoor seating...

As savvy franchise companies continue to flourish in a changing economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.

New Units & Deals

Yum! Brands Sells Long John Silver's and A&W to Franchisee Groups
Yum! Brands, Inc. has signed definitive agreements to sell Long John Silver's, Inc. and A&W Restaurants, Inc. to two separate buyers led by key franchisee leaders. Long John Silver's will be acquired by LJS Partners LLC, led by a consortium of franchisees and other investors...

As savvy franchise companies continue to flourish in a changing economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.

New Units

Zoup! Adds Second Denver Location
Following on the heels of its first Denver opening, Zoup! Fresh Soup Company opened a second restaurant in the city last month. After spending more than 15 years in the construction industry, new franchisee Tim McKennie switched career directions and signed on with Zoup!, a fast-casual soup concept founded in 1998...

Franchise Payments Network processes payments for more than 120 franchise chains across the retail, restaurant, service, and lodging sectors. This makes us uniquely positioned to provide a snapshot of the economy in franchising. Over the next few issues we are going to drill down and decipher what we are seeing in payment trends in the franchise space, with the goal helping you make better operational and marketing decisions. Let's begin with a 30,000-foot look at how consumers pay for transactions in franchise businesses.

Payments Accepted

As savvy franchise companies continue to flourish in a changing economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.


New Growth

Welcomemat Services Sells First Franchise
Welcomemat Services has signed a franchise agreement with Thomas Gardo of Hilton Head, S.C. The company's first franchise will serve Hilton Head and Bluffton, as well as greater Savannah. Founded in 2003, Welcomemat began franchising last December after building 12 successful corporate-owned locations...

As savvy franchise companies continue to flourish in a challenging economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, innovating, and continuing to grow, whether domestically or overseas. To be considered for next month's Winner's Column, please send your positive news to eddyg@franchiseupdatemedia.com.


Growth
Jersey Mike's Continues Nationwide Expansion
Jersey Mike's Subs has announced expansion plans in markets including Texas, Colorado, Los Angeles, Chicago, Minnesota, Wisconsin, and Delaware/Maryland, and existing operators are growing in 14 additional territories.

A look at today's franchise candidates will reveal they are more sophisticated, better educated, and more technologically advanced than ever before. In addition, and even more so because of the economic downturn over the past few years and subsequent slow recovery, they are extremely cautious.
Today's candidates are spending more time researching opportunities, and doing so at a much slower pace. In order to be diligent in the process, more time is spent online pouring through page after page of information, constantly bookmarking, and moving back and forth from new information to saved information. They're comparing notes with other franchise candidates on social networking sites. As well, they're gaining invaluable insight monitoring online discussion groups and forums...

As savvy franchise companies continue to flourish in a challenging economy, FUSR continues to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, and continuing to grow. And, as the U.S. struggles through its "jobless recovery," growth-oriented franchisors continue to look overseas for expansion opportunities. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com.


Dickey's Barbecue Pit Pulls Sales In-House, Boosts Franchise Sales 90%
Dickey's Barbecue Pit has signed 28 franchise agreements since January 1st, an increase of 90 percent over last year, which the company attributes to the decision to pull all sales efforts in-house this year...

As savvy franchise companies continue to flourish in this challenging economy, FUSR will continue to bring you good news each month, highlighting brands that are adding units, increasing comp store sales, striking deals with investors, and continuing to grow despite the economy - maybe even because of it. And, as the U.S. struggles through its "jobless recovery," growth-oriented franchisors continue to look overseas for expansion opportunities. To be considered for next month's Winner's Column, please send your good news to eddyg@franchiseupdatemedia.com


Monkey Joe's Adds Five New Locations
Monkey Joe's Party and Play Center is expanding - into New Jersey, Tennessee, and South Florida. The inflatables-filled indoor party and play center reports "significant growth in franchise locations" over the past year, and now has 50 locations in 17 states...

Creative financing strategies to open (and re-open) franchise locations

All franchisors are considering how to maintain or increase market share in the new normal. Nobody can deny that the Great Recession has created more and better real estate opportunities for those who can afford to exploit them, as well as a surplus of qualified operators, composed increasingly of women and minorities, without assets to operate. The number of opportunities appears to grossly overshadow any one franchisor's resources in terms of cash, personnel, and credit.

These circumstances often are precisely the motivation to pursue franchising as a method of expansion in the first place. The difference now is that prospects generally need a lot more assets and cash to qualify and fund the initial investment...

I am a big fan of sales processes. However, I am a bigger fan of buying processes. And when a company's sales process is inconsistent with their customer's buying process, breakdowns occur. Many of the tactics and techniques franchisors counted on in the past appear to be producing diminishing returns in the present. I believe we are in the middle of a franchise buying behavior transformation driven by two game-changing events: