Monday, September 9, 2019

Franchise Purchase Financing


To keep me from ranting about the Antonio Brown saga, I have invited Bryan Jasin to be a guest contributor to The Franchise Contrarian today. Bryan leads the Franchise Specialty Banking Group at The Huntington National Bank in Columbus, Ohio and serves on the Membership Committee for the International Franchise Association. On Antonio Brown, I must say one thing: Antonio, you have given me one more reason to hate the New England Patriots!

With that, Bryan take it away:

As a lender in the franchise industry, I have been party to thousands of deals.  I will not claim to have seen it all, but I have seen my fair share, then some.  At Huntington, we’ve seen the traditional start up with husband and wife manning the new venture, the seasoned multi-unit operator opening their 10th or 15th location, as well as silent partners looking for returns with an industry operator.  Sometimes we have seen new businesses grow year over year and then some businesses that never get off the ground. 

The volume of deals have provided a number of insights.  In working on transactions both big and small, there is comfort zone in the process.  Whether it is a million-dollar loan or a multi-million-dollar deal, the lender and franchise buyer must establish a trusting, supportive relationship. Trust breeds comfort.  I always try to remember that when working with a new franchisee, this is the biggest financial investment they are ever going to make. With any investment decision, you want to ensure you work with partners that have been through the loan process.   

What should you look for?  Work with a bank that has experience in your industry and a loan structure based on your experience.  A large ground up construction financing request may play well in one institution and poorly in others.  Are you looking for capital to start your venture? Not every bank has the risk appetite to lend into projected revenues and startups.

So vet your lender just as you would your new franchisor! 

Often your franchisor has relationships with banks that have experience underwriting loans for your brand.  Because the bank probably has closed many loans for other franchisees, the loan process should be efficient and not too difficult. I also encourage you to see how your franchise peers structured their loans to get started or grow.  You can learn who is good, who is not, and some good insights into loan fees and interest rates. 

Lastly, ask lots of questions throughout the process.   Your due diligence can kill a bad deal for you or make a good deal great. 

Thanks Bryan! You can reach Bryan at 614-331-8478 or Bryan.P.Jasin@huntington.com

Monday, September 2, 2019

When is the Best Time to Engage a Franchise Attorney?

Franchise Buyers: Is there a right time to engage a franchise attorney?

Based on my experience, some people wait too long to engage a franchise attorney (Well, at least most of those folks still hire counsel before they buy). I suspect that those who do delay are concerned about incurring legal fees before they select the "right" franchise. That may not always be the case.

I cannot speak for all lawyers who represent franchise buyers but my belief is that most franchise lawyers are happy to conduct a preliminary call BEFORE you are locked into a specific system. Helping buyers, by providing general, early guidance, creates a fair amount of credibility; in essence, reinforcing the idea that you have contacted the right lawyer. Screening the lawyer may be as important as screening the franchise system.

So how can this early connection help? First, counsel may simply outline the best way to work together going forward. That is, offering general guidelines as to when counsel can become effectively involved, offering the chance to ask questions along the way, and steering the potential buyer to resources to build their own "searching skills." Also, by simply directing a franchise buyer to look for the most important items in a Franchise Disclosure Document. A franchise buyer can also determine the fees that will charged once the clock is turned on. All in all, it makes you a more intelligent buyer!

On the resources, for instance, I provide potential buyers with a copy of my e-Book, How to Buy a Franchise. There are many other resources online and in print. Buyers should take advantage of these resources. My website provides a Resource section, that leads to many online guides, including information from the Federal Trade Commission, various franchisee associations, and franchise consultants.

Finally, the franchise attorney you contact may have prior experience in the category you vetting (i.e., daycare centers, home care, fast food, etc.) and may be able to offer early warning signs or guide you to a reliable franchise company.

So make the call, get on the right track, and take advantage of the resources.