There has been much consternation about the state of franchise financing in this slumping economy, but new data seems to indicate that franchise financing will increase in 2012.
Boefly, “an online small business loan marketplace that connects business owners and franchisees with over 1500 banks”, polled 133 lenders to compile data that states that “many banks plan to originate more franchise loans in 2012″ than 2011. The study also shows perhaps not surprisingly that franchises consider the access of financing to be “very important”.
Some of the other data of note, which was provided by lenders:
- 83% expect to originate more franchise loans than they did last year (94 responded)
- 44% expect to originate $1 million to $20 million in small business loans in 2012 (36 responded)
- 40% require between 11% and 20% equity injection on a start-up, and 39% require between 21% and 25% equity injection (96 responded)
- 88% are willing to fund a borrower’s first franchise unit (92 responded)
- 81.5% would consider participating in programs for veterans (54 responded)
“Based on the insight provided by both lenders and franchisors, it is clear that growth is a priority for both lenders and franchisors this year,” said Mike Rozman, Co-president of BoeFly and the webinar’s moderator.
If this data holds, it could be a bigger year for franchising than we had expected.
The problems in the US economy are mirrored around the world. Yet amid the negative forecasts and macroeconomic slumps, there are promising signs in that the global small business community is energized enough to spark an economic revival.
The Global Economic Monitor launched its 2011 report late last week. Its evidence is fascinating, especially for those considering taking their franchise outside of America. Despite the doom and gloom, it is clear that entrepreneurship is on the rise around the world. The Washington Post reported that the “world’s so-called “innovation-driven” economies saw an increase of 22 percent in early-stage entrepreneurship in 2011 over the year before, as measured by the number of people operating a business that’s less than 3.5 years old.”
Findings were mixed in relation to the US economy. Apparently there has been a 60% rise in entrepreneurship in America in the last ten months, with 12% of Americans defined as ‘entrepreneurs’ but that’s only brings the country back to 2005 levels of entrepreneurship. Scott Shane on the Small Biz Trends blog has written a post on why these statistics should not be celebrated too much by people in the US.
But beyond our shores, it’s great to see such a big push to entrepreneurship. Perhaps there is reason to be exciting about the global economy.
What is the proper way to motivate your employees? Should you be an imposing boss carrying a big stick, letting your colleagues know all of their faults while keeping mum when they do their job right (because after all, that’s what they’re being paid to do)? Or should you take a ‘gently, gently’ approach, reinforcing good will every step of the way? This is an important issue for franchisees who need to keep staff productive.
Entrepreneur has explored this fascinating topic in a recent article. They quote a 2010 Harvard study of Best Buy that says that “a 0.1 percent increase in employee engagement drove $100,000 in operating income to the bottom line of each store per year”. That’s a lot of profit for a small amount of engagement, you have to admit.
The sentiment that positivity makes a huge difference for employees was then echoed by Chester Elton, who wrote a book called The Carrot Principle, which is all about the power of positivity.
“The number one driver of opportunity and well-being is recognition and appreciation. The Harvard study showed that you don’t just want employees satisfied, you want them engaged, because an engaged employee gives you their discretionary efforts,” he told the magazine.
This is something every business owner needs to keep in mind the next time one of their employees does even the most routine thing well.
There are many big personalities in franchising, but none perhaps as large as Shaquille O’Neal.
The former Orlando Magic and LA Lakers just wrapped up one of the most decorated careers in NBA history last summer, but he is not resting on his laurels. You’ll see him on the TNT pre-game and post-game coverage of NBA games, of course, but Shaq has put a lot of his energy into developing his franchise brands. Not only does he already own 24-Hour Fitness and Five Guys Burger and Fries franchises, but he’s taken a big stake in Soupman.
Asked about why he was interested in the franchise by Franchise Times, Shaq spoke pretty directly “I tasted it one day,” he said. “It’s a good product with a great team. My favorite is the lobster bisque…it has lobster chunks.”
Shaq joins the likes of Reggie Jackson, Jason Alexander (George from Seinfeld) and Lloyd Sugarman of Johnny Rockets to play role with the soup franchise. Soup has a relatively small share of the food franchise market but with the muscle of Shaq behind it, perhaps The Original Soupman might turn soup franchises into the next sandwich franchises.
“Shaq brings the fact that he likes the soups enough to bring his fame to the endorsement,” Sugarman told the magazine. “He could endorse anything,” so endorsing The Original Soupman is a big plus for the brand, he adds.
President Obama addressed the nation this week with his State of the Union address. Since this is an election year, it was a closely watched affair with the President’s words parsed over and over again. One of the most-discussed aspects of the speech was the President’s claims to reform the tax system. Some proper changes to America’s tax regime could really make a difference for the small-business world.
President Obama made the following eye-opening comments on tax the other evening: “You can call this class warfare all you want, but asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.” Obama preceded these statements with calls for millionaires to pay as much as 30% tax a year.
Now, serious reform to the tax system is required. We were interested to learn that the IFA had sent a letter to the President’s office nearly as soon as the speech was finished.
“Franchise businesses could grow significantly faster if the President and Congress offered solutions for long-term certainty on tax reform that do not raise taxes on small business, create additional credit access and a less burdensome regulatory climate that enables, rather than stifles, job creation.”
Will the President take the steps prescribed here between now and November? We can’t say but we’re pretty sure they’d ensure him four more years.
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