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Finance

Access to capital is the lifeblood of franchise growth. Restricted lending policies of the past few years continue to be a challenge for franchisees, who need access to capital, whether to survive or expand. Lenders today are searching for solid franchisee organizations to do business with, but what exactly are they looking for? Learn what bankers, franchise lenders, private equity firms, and other capital sources want to see in a borrower - and make sure you are managing your organization in ways that make you attractive to lenders.

Learn more about the franchise finance and capital marketplace, and what factors are affecting your chances to borrow the capital you need to grow.

Seat-of-the-pants management styles may be fine themes for business magazine articles and their Hollywood adaptations, but responding to the symptoms of problems instead of preventing problems in the first place is like taking aspirin to cure pneumonia.
  • By Steve LeFever
  • 10,255    498
Long ago, when I was a newly minted junior analyst at a local investment firm, a grizzled veteran noted that it was pointless to be in the investment business if you weren't a long-term optimist. To me, that time-worn piece of advice continues to ring true. Operating from this mantra, I've spent my entire career believing that whatever short-term morass the economy or the market found itself in could be fixed (eventually) by the drive and ingenuity of the American entrepreneurial spirit. I'm hopeful that this time will be no different--although I admittedly find my optimism being severely tested. In nearly 30 years in the business, I've never witnessed such a complex array of issues at play.
  • By Carol Clark
  • 5,412    35
Often when I speak at franchise shows and conventions a tenant will ask me, "What is the best lease length?" The term, or length, of your commercial lease is an important part of your franchise business plan and ensuing lease negotiations. However, most franchise tenants do not take enough time to consider that one day they will eventually want to sell the franchise. Alternatively, they may want to expand/downsize, relocate, or close and so do not give the term of the lease the attention and consideration it truly deserves.
  • By Dale Willerton
  • 8,614    717
Greg Hamer, Sr., worked in the oilfield service industry for two decades before dipping his toe into franchising. He knows about hard work and about managing assets. Today, he is the largest Taco Bell franchisee in the state of Louisiana. Hamer has operated B&G Food Enterprises out of Morgan City, La., since opening that first Taco Bell unit in 1982. In the 1990's, the company added KFC and Pizza Hut units to the portfolio and most recently, Teriyaki Experience.
  • Multi-Unit Franchisee
  • 3,173    0
As noted in the last issue, investing is not for the faint of heart. It takes time and an ability to integrate an expansive range of information--as well as a steady head and a strong stomach. This combination often means that seeking outside help makes the most sense. But how do you go about finding an investment manager that's the right "fit" for you?
  • By Carol Clark
  • 6,775    169
For many businesses, growth often means a physical expansion of an existing store or the opening of additional stores. Is it worth the cost? There are two parts to the answer: finance and marketing. The financial analysis answers the question, "What do we need?" The marketing analysis answers the question, "What will we get?" To get our arms around the analysis requires an extension of my "break-even" discussion in the previous issue.
  • By Steve LeFever
  • 19,207    4,671
In the previous issue, I outlined a seven-step process guaranteed to improve performance. We call this process Profit Mastery. My goal going forward is to give you more detail on each of the steps, a specific action plan for how to apply each to your own business, and how to incorporate the results into your strategic thinking
  • By Steve LeFever
  • 14,169    4,462
The way to a man's heart may be through his stomach, but the way to a banker's heart is through strong unit economics.
  • By Eddy Goldberg
  • 3,788    0
The most fundamental business strategy calls for black numbers on the bottom line. In simplest terms, it's proof the business is generating more cash than it is spending. All too often, though, entrepreneurs get involved in businesses without employing a proper system to help them keep a watchful eye on what they're earning and what they're spending. Managing day-to-day operations can be so time-consuming that it leaves little room for financial analysis. Or perhaps key individuals lack a basic understanding of how to read and interpret financial statements. Combine these factors with the down economy, and you'll likely wind up with a troubled business.
  • By Kerry Pipes
  • 4,927    518
In the few minutes it takes you to read this article, 40 businesses across the nation will fail--and that statistic was [i]before[/i] the economic downturn of the last 24 months. Tragic? Yes. Remarkable? Not at all. The road to business success is littered with the skeletons of companies whose owners--mostly brilliant and skilled individuals--failed to "take care of business" in the financial management of their enterprise.
  • By Steve LeFever
  • 2,310    0
There's a year-end ritual I've always hated. No, it's not those standard resolutions to eat better, exercise more, and clean the piles off my desk. Worse. It's being asked to forecast where "X" will be in a year, "X" being the level of the Dow, the price of gold, the yield on short-term Treasuries, etc.
  • By Carol Clark
  • 2,445    0
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Gaining access to and securing capital is more important for franchisees today than ever. Every week we talk with multi-unit franchisees about how they are growing and the kind of financing it takes for them to achieve their goals and objectives. It's an important topic and sometimes we get some very candid responses.
  • Multi-Unit Franchisee
  • 2,842    0
Buying assets out of bankruptcy court is time-consuming but usually easy. But if your target is a franchisee and you get choosy - meaning, for example, that you want to buy only 10 outlets in a bankrupt 20-outlet franchise restaurant chain - things get dicey. Why? Because it's hard to determine a fair value for such assets, and if you fail to do so, you could find yourself back in court fighting angry creditors who think you've cheated them.
  • By Barry Kurtz and Nevin Sanli
  • 2,698    0
Did you do your homework? In my last article, I discussed taking a broader look at the concept of "performance measurement." Rather than allowing a simple percentage change (or even a percentage change relative to a broader index) drive how satisfied you feel with your portfolio's performance, I suggested thinking longer and harder about defining success on your own terms. After all, what good is a "good" performance number if it doesn't leave you with a portfolio that can help you achieve your goals?
  • By Carol Clark
  • 1,895    0
Gaining access to and securing capital is more important for franchisees today than ever. Every week we talk with multi-unit franchisees about how they are growing and the kind of financing it takes for them to achieve their goals and objectives. It's an important topic and sometimes we get some very candid responses.
  • Multi-Unit Franchisee
  • 2,840    0
Gaining access to and securing capital is more important for franchisees today than ever. Every week we talk with multi-unit franchisees about how they are growing and the kind of financing it takes for them to achieve their goals and objectives. It's an important topic and sometimes we get some very candid responses.
  • Multi-Unit Franchisee
  • 2,962    0
It seems there really is a silver lining in every cloud. And the recent economic downturn has deposited a little of that silver at the feet of some multi-unit franchisees who can tolerate risk and don't mind a little "remodeling" work. Today, opportunities abound to buy distressed franchise units from other troubled or bankrupt franchisees--often for pennies on the dollar. If they have the stomach, these "rescuers" can snatch up these units, turn them around, and watch the dollars flow in.
  • By Kerry Pipes
  • 4,559    636
I know few people who had money-making investments in 2008. On the flip side, I know many whose portfolios technically beat their respective benchmarks. In a rising market (like that experienced in 1999), beating the benchmark would have been considered a badge of honor--providing ample bragging rights on the golf course and around the dinner table. However, having relatively "less loss" in a down market isn't exactly considered a wonderful experience for most of today's investors.
  • By Carol Clark
  • 1,834    0
Business owners often get trapped because they don't heed the messages their business sends and they don't pay attention to basic principles. The following checklist represents a clear set of danger signals - situations and issues - that have a clear and negative effect on cash flow.Take a few minutes under the harsh, cold light of reality to ask yourself how many of the following danger signals exist in your business and then evaluate carefully their implications:
  • By Steve LeFever and Dave Ashcraft
  • 1,726    0
Gaining access to and securing capital is more important for franchisees today than ever. Every week we talk with multi-unit franchisees about how they are growing and the kind of financing it takes for them to achieve their goals. It's an important topic and sometimes we get some very candid responses.
  • Multi-Unit Franchisee
  • 2,297    0
At some level, there's a growing realization that the current economic "decline" is not just a speed bump. The assumption that a return to the "status quo" is sure to come--that it's merely a matter of time--also appears to be quickly fading. The emerging conclusion: Things typically don't come this unhinged only to revert to what existed before.
  • By Carol Clark
  • 1,553    0
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What do these questions have in common? Each relates to how changes in costs, volume, and pricing affect your bottom line. By the end of this article, we'll have given you a single analysis model to help you answer these questions more accurately than ever before.
  • By Steve LeFever and Dave Ashcraft
  • 4,947    354
The current recession and credit crunch are putting the hurt on franchise businesses, says a new report by the International Franchise Association (IFA). There's no question that the franchising's economic growth and ability to create jobs has been hamstrung by the lack of available credit.
  • Multi-Unit Franchisee
  • 1,754    0
Gross sales? Target revenue? Break even? No, this figure is more important than all those. These days, as we're all looking at ways to cut costs, figuring out where and how to cut is extremely important. Using break-even analysis allows you to go in with a scalpel instead of a hatchet.
  • By Steve LeFever and Dave Ashcraft
  • 4,691    0
At some level, there's a growing realization that the current economic "decline" is not just a speed bump. The assumption that a return to the "status quo" is sure to come--that it's merely a matter of time--also appears to be quickly fading. The emerging conclusion: Things typically don't come this unhinged only to revert to what existed before.
  • By Carol Clark
  • 1,804    3
At the end of January, following the headlines of optimism and encouragement that came with the presidential inauguration, came the harsh reality of job layoffs and plant closings in one company after another across the country. Home Depot announced 7,000 layoffs, Pfizer trimmed 19,000 jobs, and Caterpillar 20,000. In total, nearly 60,000 wage earners became unemployed, and while many enjoyed reasonable severance packages others were most certainly caught unprepared for the income loss that will follow.
  • By Rollie Trayte and Gary Widman
  • 2,002    0
For over a year, the headlines have been rife with dire warnings that seem to indicate the demise of the world as we know it. For example, we learned that in June we experienced the worst percentage decline in the broad market averages since the Great Depression. We also discovered that home prices are declining faster than at any time in recorded history, and that debt levels (personal and governmental) have never been so high--nor have gas prices, even factoring in inflation. Gold is going through the roof and the dollar is falling through the floor. Corn, copper, steel, soybeans, etc. are shattering more records than Michael Phelps. And woe is us: flu season is right around the corner. Could this be the year of the "Great Pandemic"? It's no wonder that consumer confidence has dropped to multi-decade lows, and that stock markets around the world are misbehaving. But what could actually go right as a result of this upheaval?
  • Carol Clark
  • 2,036    0
Too often, franchise owners lack the cash flow needed to act fast enough to capitalize on an opportunity. As a result, franchisees are forced to sit back and watch others take advantage of the situation.
  • By Thomas Epstein
  • 1,986    0
We are a nation of worriers. And lately, when it comes to fretting about the capital markets and the economy, it seems we have elevated worrying to an art form. Just the other day, I heard a national news announcer proclaim that investors had become "trepidatious" in response to recent market volatility. Huh?
  • By Carol Clark
  • 1,998    0
"How's risk management in the big bank world?" he asked the banker. "I wish it were that," the banker replied. "It's more about risk elimination. We won't make a loan to anybody unless they don't need the money."
  • By Eddy Goldberg
  • 1,707    0
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