With the challenges to the banking sector continuing, entrepreneurs and franchisees have to look elsewhere for funding. Many franchisors have stepped into the breach to provide help, though the terms can be difficult.
The Wall Street-Journal provided an interesting profile of the upsurge in franchisor lending recently. The story centres on the franchise Edible Arrangements and their quest to get more financing. Clearly, these businesses are stepping into a void as America’s big banks still struggle to offer lending. And they're coming up with creative ways of doing so.
Dunkin’ Donuts, for instance, have been waiving royalty fees in select areas they want to invest in. Quiznos is being more even creative.
“Quiznos, privately owned by QIP Holder LLC, created a lending division earlier this year that allows parties to buy a store with only a $5,000 down payment. Participants don't pay the franchise back in predetermined amounts. Rather, owners must funnel store profits—80% each month—back to the company until the loan is repaid, which is expected to take two to five years. Initial losses are tacked on to the loan.”
And though the IFA says in the story that the lending market is still hard, it’s exciting to franchisors coming up with inventive ways to get more people in business.