Not sure what accreditation is and why it’s important? 

Cashflow It© Managing Director James Scurr takes a behind-the-scenes look at the accreditation process and how franchisors can benefit.

Put simply, accreditation is forming a package or an offer that then becomes available to the whole franchise network. “We first work with the franchisor and get to know their business”, explains James. “We then formalise an offer based on our assessment. From here, we are able to lend money to other franchisees within that funding group based on the assessments we have done with the original franchise”.

This means franchisees don’t have to go through the normal full assessment process to access funding. All franchisees need to do is complete an application and they are given a preapproved level of funding. “All the hard work - collecting all the supporting information that you would normally be expected to provide - has been done up front by the franchisor”, says James.

The accreditation process is very similar to the franchise system in that the information used when a franchisor adopts a franchisee is exactly the same. Funding experts consider four areas in their decision-making process: recruitment processes, disclosure documents, business financials and store assets.

The Disclosure Document

Under the Franchise Code of Conduct, every franchise system in Australia must have an up-to-date Disclosure Document. The legal information contained in the document is important for funding experts. “The Disclosure Document helps us determine the network’s performance and profitability such as how many stores have been sold or how many franchises have been shut down and terminated”, says James. “We also ask to see the franchisor’s history, experience and financial position as well as their recruitment process to ensure we’re comfortable with the information being gathered from potential franchisees”.

Funding assets in a franchise is easy for funding experts like Cashflow It because every unit in a franchise store is potentially going to be the same. “Sometimes there are unique assets in a franchise chain so we need to do a little homework around the value of the asset and the remarking value”, says James. “But other than that, we do a general asset assessment based on a typical store”.

There are currently 40 franchise systems accredited with Cashflow It in Australia. Accreditation helps franchisors rapidly grow their network by reducing the two main challenges: recruiting quality franchisees and access to finance. “By having an accreditation model in place, it means franchisors can be assured that their current and prospective franchisees have a guaranteed avenue for accessing cash flow”, says James.