COVID-19 has provided a brutal reality check for franchise brands requiring continued finance access for their franchisees. Access to finance, for the majority, will be more challenging than ever.

However, many franchise brands will continue to enjoy the support of their lenders and have a few things in common. Primarily, they will have a focus on being ‘Lender Friendly’. 

Rather than expressing frustration at the lack of support from lenders, they will ask themselves what they can do to make it easier for those lenders to support their franchisees.

‘Lender friendly’ franchise brands

Lender friendly franchise brands have a few traits that make them attractive to lenders, and go a long way to improving access to finance for their franchisees. These include:

• A positive approach. They do not dwell on broader adverse media campaigns or social media agitation activity over which they have little control. Their focus is on their franchisees, their customers and other key relationships. They are driven by innovation, new channels and a better customer experience.
• A Partnership focus. They recognise the crucial role that lenders play in funding new and existing franchisees. Whilst franchise systems need access to finance for their franchisees, lenders equally need franchise systems to back up their promises of providing effective meaningful support when the pressure is on.
• Stepping up. Lenders are used to dealing with small businesses experiencing financial pressure. Franchising has a massive advantage when strong brands stand behind their franchisees and provide them with extra and direct support. This can help them survive, turn their business around or maximise the exit sale price. These are of course all very good outcomes for lenders. In fact lender friendly brands see difficult situations as their opportunity to reinforce why lenders should be dealing with their brands. 
• A strong plan. Their focus will be on how to accelerate their post COVID-19 recovery, or how to build on the resilience their franchise system showed during the pandemic. The plan will be built on a long history of learning, and of course recent lessons from COVID-19. They will be agile but have key targets and actions that can be measured and refined.

Good information. 

It has always been a challenge for lenders to identify which of the 1,100 plus franchise brands in the country represent a better risk profile than others. Brands that can demonstrate their resilience during the pandemic and why they are a good prospect in the recovery period will have a clear advantage. However, great care needs to be taken in how this information is put together and presented to lenders. The information needs to be provided in a language and format that lenders understand and trust.

Getting to yes - funding by the banks 

With less bank franchise accreditations apparent, at least for now, the majority of transactions will be assessed on a case by case basis. The availability of independent and objective information for lenders will undoubtedly go a long way to getting the right answer to that question by focussing on tomorrow’s opportunities rather than yesterday’s events.

Rather than trying to sell your brand, or risking inaccuracies or omissions in communicating the strength of your brand, one option is to create your own portable Bank Report. These, evidence transparency, position your brand as “Finance Ready” and promote improved finance access for your franchisees. They will also help open up access to emerging and non-traditional finance channels.

Full disclosure, the portable bank reports is something we do at FRANdata for the sector. However, I’d be happy to talk with you over any options that may be suitable for your brand’ scenario, whether we can help you or not. After all, a stronger, better performing franchise sector is good for everyone.

Contact Darryn McAuliffe;

Contact me for assistance off our company FRANdata Showcase page.