Franchises finance from within

Russell Emmerson
National Features
November 11, 2012

LFRANCHISES are hitting back at a perceived lack of bank finance to fund their own new businesses – and they are winning the battle.

Griffith University’s annual Franchising survey this year shows almost half the sector (49.2 per cent) see a lack of franchisee finance as a critical challenge, second only to finding franchisees (77 per cent).

The PwC-commissioned survey pegs it as the third-highest challenge, cited by 55 per cent of respondents, down from from 73 per cent two years earlier. These very concerns convinced the US arm of tool franchisor Snap-On Tools to provide its own financing for potential franchisees.

National franchise manager Nick Hudson (pictured) says the decision has paid off with the $1 billion global financing business responsible for 30 of the last 32 franchisee starts.

Banking partners agreed they were seeing less business as a result of the initiative, which Hudson says has made “a fundamental difference”.

“We decided it was essential to recruiting,” he says.

“Every franchisee has put on rose-coloured glasses and squinted to see whether this business is going to be successful (when applying for finance).

“This simply gives them good access to finance, and we all know the figures … so we’re able to focus on making sure we have the right business system for the people we recruit.”

Hudson says the finance is organised through the company’s global operations to fund the initial $40,000 franchise fee plus GST, equipment and working capital that add up to $286,000 all at rates on par with the Big Four.

Convenience chain 7-Eleven is also heeding the call, funding stock purchases in the lead-up to busy periods and maintaining the cost of large fixed items, including property-related costs