Creating Sensible Employee Policies When Building Your Company

WHEN BUILDING A COMPANY, YOUR CORPORATE POLICIES… will mold and shape the culture and mission of your brand. In addition, your team members performance and the aspect of becoming an “employer of choice” to attract the “best and the brightest” are directly connected to the polices you create for your organization. Warren Cook,President & CEO of SymbianceHR offers his thoughts on best practices when developing policies for your company.

Development of Policies that Make Sense
– By Warren Cook, President & CEO

In my experience, small businesses owners care tremendously about their staff, so much so, that at times they develop practices that can later place them at risk and expose them to liability for discrimination. For example, paying an employee for a “few weeks” when they are out sick or taking care of a family member but then when a new employee wants time off since they are not friends, they are told use their paid time off or the absence is unpaid.

Maternity leave is another great example, as I have observed everything from 100% pay the entire absence without a policy written to working from home during the maternity leave, all while trying to provide FMLA coverage (job protection) when the company only had 8 employees. At the same time, when a male employee decided they wanted time off to be with their spouse and newborn, they were denied the request.

In another situation, an employee was in an auto accident, and the owner felt bad, so they continued their compensation at 100% for several months. Yet another employee, later in the year, requested time off because they heard about the other employee getting paid, and wham, problem for the employer because they didn’t want to pay this employee.

Inconsistency in practices is the road to discrimination, even if unintended. These employers and many other examples I could share, also neglected other means to provide the support to their employee they desired, without breaking the bank and destroying company cash flow. For example, implementing a Short Term Disability program, employer or employee paid, could allow for an offset of the cost in your current practice. Why? You pay an insurance premium instead of the full cost of the employee compensation. Let us not forget benefit premiums during an employee absence, that also can become a double hit on the employer with poor leave policies in place.

I encourage you to strategically plan for the various situations that can occur with your workforce, and then determine what is the most cost effective and beneficial method to provide the desired support to your workforce. It may be insurance, it may be time off, it may be alternative work schedules, it may be remote work, or it may be another solution all together. Remember, setting precedence using a discriminatory approach can expose your business to tremendous risk and liability even though your have great intentions. Seek the right advisor to help guide you through the development of legally compliant and non-discriminatory solutions to take care of your workforce with policies and programs that make sense. Visit: https://www.symbiancehr.net/

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About the Author: Warren Cook
Warren is a conscientious human capital management leader dedicated to providing coaching and guidance to business owners and leaders in support of their continued success. With over two decades of practical industry experience across the public and private sector, and various industries from pharmaceutical to financial to telecommunications, Warren enjoys applying his depth and breadth of industry and academic (BS/MBA/MS) experience to solving the workforce management challenges of today. With a proven track record of implementing successful solutions to business challenges by effectively orchestrating change initiatives, strategic planning & execution, system and process engineering, people development, and modeling leadership behaviors to motivate the workforce, Warren is uniquely competent and capable of driving continued business success for your organization.

Warren enjoys giving back to the community, and accomplishes this passion through his workshops and training to non-profit organizations and industry associations across the region and across the country. To further this ambition Warren served the Delaware HR & Business Community by presenting at the DE SHRM 2017 & 2018 Annual Conferences and was the lead presenter at the July 2018 DE SHRM Diversity & Inclusion conference.

Warren authored the book “Applicant Interview Preparation – Practical Coaching for Today” and provides training and coaching on this topic in the local community at schools and non-profit organizations to support the development of the next generation of professionals.

If you want to benefit from the experience and capabilities Warren has to offer, you can reach him by email at [email protected] or by phone at 302-276-3302. Visit: https://www.symbiancehr.net/

Franchise Marketing – Do’s & Don’ts

FRANCHISE MARKETING – DO’S & DON’TS…Today’s featured post is courtesy of Harold Kestenbaum. Harold is one of the Top Franchise Attorneys in the country. He works exclusively with franchisors and has been involved in some of the most important franchises ever launched such as Sbarro, Ranch *1 and Five Guys. In this “double article” Harold shares his insights on franchise marketing and recruiting new franchisees.

The Dos and Don’ts of Franchise Marketing Materials
By Harold Kestenbaum

As an entrepreneur, it can often be worth your while to consider franchising your business. When you have a great product or service, franchising is an excellent way to create a new revenue stream, while increasing brand awareness. As with any new venture, the key to successfully franchising your business is laying the groundwork for a thriving enterprise. This begins with your franchise marketing materials.

Your franchise marketing materials are the key to attracting like-minded individuals to work with your business and grow your brand. It is important to remember though, that you must be careful with what you do and don’t say in these documents, as you want to remain legally compliant and truthful in your endeavor.

DO explain your brand, mission, and infrastructure. In your franchise marketing materials, it is vital to explain who you are as a company, how you operate, and why someone should want to work with you.

DON’T promise your franchisees any specific profits or financial gain. Since every market is different, it is important to refrain from making promises about a franchisee’s total profit or financial gain from buying into your business.

DO set the right restrictions. Your marketing materials should establish policies you have on hiring, training, proprietary processes, etc. but it should also allow the franchisees some freedom to make the business their own.

DON’T neglect to screen franchisees. Just as you would interview potential new hires for your location, you will want to screen franchisees once they have inquired about this opportunity. You want to build a network of people dedicated to your brand and mission.
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Franchise Marketing Materials 101: Establishing Your Recruitment Website
By Harold Kestenbaum

When you have made the decision to franchise your business, you will want to put a lot of time and money into your franchise marketing materials, especially at first. In order to grow your brand and find potential franchisees, these marketing materials must be appealing, straightforward, but also compliant with the law. As you begin working on your marketing materials and franchise recruitment website, it is important to work with a seasoned franchise attorney and remember these key tips.

Register your franchise: Before advertising your franchise to a particular state, it is important to know that many states require a franchise to be registered prior to the sale of any franchise location, but also any offer of franchise. This means you must take care of all necessary registration before launching your website in a given state or sending out marketing materials.

Understand the laws of advertising: Not only do you have to account for the franchise laws that apply to your business, but you also have to consider the other laws which affect advertising. These can include intellectual property laws, unfair competition laws, and deceptive trade practice laws. Your franchise attorney can review all marketing materials to ensure that you are not infringing on any other company’s rights and that you are in full legal compliance.

Provide clear, accurate information: To successfully gain leads from your website and marketing materials, it is critical for franchisors to provide clear, accurate information which provides potential buyers with enough evidence to make a purchase decision. This information should outline the requirements for buying into the franchise, as well as the type of support franchisees will receive once they are a part of the program. You will want to avoid words and phrases such as success and profit, so as not to mislead buyers about their expectations of buying into your franchise. You want to give franchisees truthful information, without making any specific claims about financial earnings, especially since every market is different.

Stay consistent: In all your marketing materials, you want to stay consistent in the way you represent your brand. You will want to avoid making promises that you cannot fulfill once a buyer signs a contract and purchases a franchise under your name. By staying consistent in all your content, you can avoid potential legal roadblocks down the road.
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About the Author
HAROLD L. KESTENBAUM is a franchise attorney who has specialized in franchise law and other matters relating to franchising since 1977. From May 1982 until September 1986, Harold served as franchise and general counsel to Sbarro, Inc., the national franchisor of more than 1,000 family-style Italian restaurants and, was a director from March 1985 to December 2006. From September 1983 to October 1989, he served as president and chairman of the board of FranchiseIt Corporation, the first publicly traded company specializing in providing business franchise marketing and consulting services and equity financing to emerging franchise companies, which he co-founded. Harold has authored the first book dedicated to the entrepreneur who wants to franchise his/her business, called So You Want To Franchise Your Business. It is a step-by-step guide to what a businessperson needs to know and do to properly roll out a franchise program. Harold’s book is available at major book stores and on Amazon.com or you can click here for more info on his book So You Want to Franchise Your Business.

Ten Tips For Evaluating A Franchise Opportunity

WITH THE UPCOMING FRANCHISE SHOW IN NYC, IT’S CRITICAL TO KNOW… how to evaluate the validity of the opportunity. My colleague, Ed Teixeira wrote this excellent article on properly evaluating a franchise system. You’ll find these 10 tips insightful.

How To Do A Preliminary Evaluation Of A Franchise Opportunity
Ed Teixeira – Contributor

You don’t have to be an expert in franchising to perform an initial evaluation of a franchise opportunity. I use my experience as a franchisor executive to know what to look for in a Franchise Disclosure Document (“FDD”) but it’s not necessary to have a strong knowledge base of franchising to make an informed decision. In addition, having seen the results of numerous franchise FDD analysis and comparisons, while at FranchiseGrade, I’ve become more aware of what separates the good franchise systems from the rest of the pack.

A prospective franchisee should have a process that’s easy to follow, this process is to focus on key items in the FDD, and although each item in the FDD is important, some are more important than others. This evaluation is not intended to replace comprehensive franchise due diligence, including obtaining franchisee feedback, but rather it’s a way to filter out the good performers from the rest. Before investing valuable time and money, you can find those franchise opportunities that meet key performance standards. I’ve presented this information ranked by what I consider to be most important so it may not follow the order in how they appear in the FDD.

My Ten Key Items:

1. Internet Search
The first thing I do is search the Internet using the name of the franchise with terms like “lawsuit”, “franchise complaints”, “franchisees sue”, etc. This only takes a few minutes and can lead you in a certain direction if you find some results. Unless there is a large number of negative results you’ll know that the franchise isn’t tainted. Keep in mind that large franchise systems based upon their size, are more susceptible to franchisee complaints and lawsuits than smaller franchise systems.

2. Franchise System Growth-Item 20

I look at franchise outlet growth over time. Steady growth over a three -year period is an indicator of a healthy franchise system. Negative trends, or up and down growth over several years can be indicative of an unhealthy franchise system. Be aware that poor franchise growth may not always reflect existing ownership since the franchise might have been re-acquired by new owners.

3. Franchisee Turnover-Item 20
Franchisee turnover is a key statistic to focus on. You can learn how many franchisees left the system for the most recent 3 -year period and the reasons why. Ceased Operations can be the result of a bad franchise investment opportunity or franchisee failure due to undercapitalization or poor site selection. On the other hand, a large amount of Franchisee Transfers can be a sign of a good franchise system with a strong market for resales.

4. Litigation-Item 3
Franchise litigation is an indicator of how positive, franchise relations are between the franchisor and its franchisees. Although disputes between the parties is a normal occurrence within franchise systems the absence of significant litigation in the FDD of a mature franchise system is an indicator of satisfied franchisees. When reviewing the FDD of a large franchise system, expect to find some amount of litigation. A good sign is litigation cases that represent a small percent of the number of the franchise outlets.

5. Financial Performance Representation -Item 19
The FDD should provide enough franchisee financial information to enable a prospective franchisee to create a pro-forma income statement and cash flow projection. The more financial information the better. With few exceptions, such as a franchise start-up, a lack of any financial disclosure is a red-flag.

6. Royalty and other fees- Item 6

I use franchise fees to include royalties, national and local advertising fund contributions, plus other fees to identify the total ongoing fees a franchisee is obligated to pay. More franchisors are using creative ways to charge fees, including a fixed royalty dollar amount plus a declining royal rate based upon franchisee sales.

7. Franchisee Investment-Item 7
The initial investment presented in the FDD is designed to provide prospective franchisees the estimated minimum and maximum amount of capital needed to establish and open the franchise. An important requirement of the items in the Initial Investment table is that each is item be as accurate and complete as possible.

8. Franchisee Territory-Item 12
The territory represents a key area when evaluating a franchise opportunity. The critical components of a franchise territory; is the quality of the franchise territory and whether it provides the franchisee the potential for continued growth and whether the territory is protected and exclusive and how it’s defined. Does the franchisor have the right to sell products or services to customers in the territory through various distribution channels?

9. Franchisor Financials-Item 21
Although a CPA is best qualified to review the franchisor financial statements, look for the primary sources of franchisor revenue. If a medium to large franchisor is generating more revenue from Initial Franchise Fees compared to royalties, it could represent a red-flag. Does the franchisor receive a large proportion of its revenues from vendor rebates? How much does the franchisor spend on G&A, especially franchisee support and infrastructure? For a more in-depth review, utilize a CPA to conduct the review.

10. Franchisor Rights and Franchisee Restrictions-Item 16
This section indicates what rights the franchisor retains over the franchise operation. Although all franchise agreement tilts in favor of the franchisor, too many restrictions on the part of the franchise and too few franchisor obligations in terms of assisting and supporting the franchise, require more review including questioning the franchisor representative.
Based upon the above, one can determine how a franchise opportunity has performed and whether it represents a reasonable franchise investment. Whether or not you’re an individual searching for one franchise, a potential multi-unit franchisee or a PE firm, this ten-step process can provide a straightforward method for vetting a franchise opportunity.
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About the Author:
Ed Teixeira is Chief Operating Officer of Franchise Grade and was the founder and President of FranchiseKnowHow, L.L.C. a franchise consulting firm. Ed has over 35 years’ experience as a Senior Executive for franchisors in the retail, healthcare, manufacturing and software industries and was also a franchisee. Ed has consulted clients to franchise their existing business and those seeking strategic solutions to operational, marketing and franchise relations issues. He has transacted international licensing in Europe, Asia, and South America. Ed is the author of Franchising from the Inside Out and The Franchise Buyers Manual and has spoken at a number of venues including the International Franchise Expo and the Chinese Franchise Association in Shanghai, China. He has conducted seminars, written numerous articles on the subject of franchising and has been interviewed on TV and radio and has testified as an expert witness on franchising. He is a franchise valuation expert by the Business Brokerage Press. Ed can be contacted at [email protected]

Lead Generation – Lifeblood of Franchise Sales

LEAD GENERATION – LIFEBLOOD OF FRANCHISE SALES…You’re damn right no one told you, or you may not have purchased the Op’s Manuals or had an FDD written. What you must consider is the total cost to launch a franchise company. Moreover, the most significant piece to that puzzle is the “Cost Per Acquisition” or Lead Generation.

By Gary Occhiogrosso – Founder Franchise Growth Solutions, LLC.
Photo by David Marcu on Unsplash

Despite what you’ve heard, start-up and emerging brand franchises do not sell themselves. Oh sure, we all want to believe that the brands we’ve created are so unique and special (like our children) that everyone will beat a path to our door just for the opportunity to invest a few hundreds thousand dollars in opening one of our franchises. Although I’m one of the most positive people you’ll ever meet when it comes to franchising, I’ve also been around long enough to know that a franchisor’s short view, lack of research and sometimes ego are responsible for one of the most the critical mistakes startup franchisors make. That is to underestimate the Cost Per Acquisition regarding Lead Generation.

Let’s go back to the beginning.
You have this idea to expand your business. You do a little research that leads you in the direction of franchising. So how does one do that? Well for many, after a quick google search, they come across listings for franchise attorneys that will write a Franchise Disclosure Document and a “Franchise Development” company that will take on the responsibly of writing a set of Franchise Operations Manuals. Many startup franchisors and emerging brands are led to believe that these two components on their own will make you a franchisor. While these items are necessary, this by itself happens not to be the whole truth.

My firm Franchise Growth Solutions specializes in start-up, emerging and turnaround franchise brands, I have witnessed the challenges facing these brands at their outset. As a result, I’m about to tell you the first thing you won’t want to hear – You need approximately $120,000 to $200,000 over the first 12-15 months of your startup to properly launch a franchise brand.

WOW – No One Told Me.
You’re damn right no one told you, or you may not have purchased the Op’s Manuals or had an FDD written. What you must consider is the total cost to launch a franchise company. Moreover, the most significant piece to that puzzle is the “Cost Per Acquisition” or Lead Generation. Here’s the second thing I’ll tell you that you won’t want to hear – Simply put, no leads, no franchise sales. Also, to be clear, we’re not talking about the enthusiastic customers that tell you they would love to open a franchise. Trust me, most of these evaporate as soon as they realize what it costs to open a business and that you don’t have a siphon hose that goes from your cash register directly into your pocket.

The data today regarding how much it costs to sell a franchise is overwhelming. It’s true every once in a while (like a total solar eclipse) we hear about the franchise brand that almost from its outset grabs the imagination of the general public and eventually investors, and before you know it, there are 150 operating units. There are three things to embrace with this scenario, one; it’s great to expect and even initially forecast that you fall into the solar eclipse category but bad if you build a long term financial business plan on it. Two, as I mentioned earlier, it is very very rare and three; many times (usually most, but I can’t quantify that) these rapid rising stars collapse under their weight due to lack of infrastructure, franchisor experience and lack of growth capital. Many of these franchisors believe they can support their growth by “selling franchises.” However, just like a hungry shark, the bigger it gets, the more bodies it needs to eat to stay alive – Ouch if you’re a franchisee that just got swallowed up so the franchisor could pay the electric bill at the office.

There is a “Light At The End Of The Tunnel.”
Some of the things we instill in our franchisor clients is the understanding that it takes time, patience and money. What’s daunting is; there are “unknowns” regarding how much time and money. We can point to statistics and make some forecasts, but forecast change and franchisors need to be able to move with those changing dynamics. If the Franchisor is unwilling or unable to modify and pivot their franchise sales program, they will eventually give up, fail or be sidetracked by some other interest, just like the dog that chases the ball no matter where you throw it, even in traffic.

The “light at the end of the tunnel” is the way the Cost per Acquisition will be reduced as you open units, garner more brand recognition, create successful franchisees and start to build up a digital footprint that will drive interested people to your franchise website. That said, it’s important to embrace three ideas; be properly capitalized as mentioned above, also slow and steady (within plan) wins the race. And lastly, solely chasing ROI is pointless. If you dismiss these three ideas, you run the risk of exhausting yourself and depleting your assets simply because you “need” to grow quickly. Notice I said “need” not “want.” We wouldn’t be prudent entrepreneurs if we didn’t want to grow our companies as quickly as possible. However, the frenetic, lizard-brained approach often misjudges,ignores the universe or doesn’t know that mistakes abound, egos mislead and eventually you have that sandwich chain that everyone was so high on in the early 2000s that has now all but vanished, seeing multiple bankruptcies and too many lawsuits to count.

The Full Picture
Getting all the facts on how to franchise your business is the most critical exercise you can perform. Launching your brand the right way may take a little more time and money, but a strong foundation, a good plan and great people will pay off in the long run.

For more information on this topic contact us at [email protected]

6 Tips When Buying A Franchise

Starting a business can be a life-altering event both good and sometimes not so good. One of the ways people reduce their risk is to purchase an established brand with a proven business model – a franchise.

Franchising has proved over and over again to give a new business owner the highest probability of success. If you follow the system, choose an experienced franchisor, work diligently, are appropriately funded and understand what you’re getting into then operating a franchise may be a perfect business model for you.

Selecting a franchise and purchasing a franchise combines gut reaction with solid research. Although there are many steps to buying a franchise here are my Top 6 Tips that will keep you moving forward in the process. I recommend never skipping or overlooking any of them.

Tip #1 – Begin With Some Soul Searching
Make a written list of what you believe you’re looking for in a business opportunity. However, for this exercise, you cannot put the words “make money” on your written list. The reason for that is simple. I want you to look inward at your dreams, background, hobbies, likes, dislikes, skills, social and community positions and all the elements that a business would need to deliver to you, despite the money. I know many franchisees and entrepreneurs that dread getting up every day to work their business even though are making all sorts of money. Franchisees that are great at selling or corporate engagement should seek a franchise that puts them in front of customers in a corporate environment, perhaps in the advertising business or financial business. Entrepreneurs that like to craft things or work outside or work with their hands should never seek out opportunities that land them behind a desk or stuck in a shop 12 hours a day. Although ultimately in time you will not be doing the “work of business” keep in mind that in the startup phase you may need to. Moreover, if you don’t like the work or have neither the time, desire or inclination to develop new skills you may never get to the next level in developing your business. If you can’t “see yourself” doing a particular type of work, then walk away, no matter how much money you think you’ll make. Look in the mirror and be honest when you sit down to write your list.

Tip #2 – How Much Available Capital Do I have?
Numerous business reports cite the number one reason a small business fails is that proper thought and consideration wasn’t given to the appropriate capital required to open and sustain the start-up of a small business. A lack of adequate money can destroy you before you even begin. It is crucial that you understand the numbers. Before you start your quest for a franchise, you should access your available liquid capital, your borrowing ability and the net worth necessary to collateralize a business loan. Also, there are various ways to finance your new business. That includes your savings, investments or loans from friends and family, bank loans, SBA loans and using the funds in your 401K to finance the new venture. Once you know the number, you can go shopping, or you may decide you don’t have enough money now and need to create a plan to accumulate the appropriate amount of start-up capital. Your accountant may be able to help you access your investment ability. Keep in mind many accountants (and lawyers) are not entrepreneurial minded or risk takers. Some will attempt to “protect you” by trying to convince you not to go into business. Remember you’re assessing your investing capability not looking for permission. That said, knowing how much you can invest will save you and the franchisor time. In addition, it’ll place you in a better position to succeed.

Tip #3 – Meet The “Parents”
In this case, the Franchisor. Once you’ve selected the type of industry you’d like to be in, its’ now time to search for a company that meets the criteria on the list we discussed earlier in this article. There are many ways to seek out opportunities, Franchise Trade Shows, Websites, Franchise Business Brokers and others. I’ll cover that in a subsequent article. Once you reach out to a franchisor, a franchise sales representative will most likely contact you. At this point be prepared to answer some questions over the phone. You may also be asked to fill out an application before going any further in the process. Many reputable franchisors will not engage in any serious conversation with a candidate without an application. My experience has been that franchisors willing to forgo written applications or skip asking qualifying questions at the start of the process may be desperate to “sell” a franchise. That should be a red flag for you. Beware, because it may be a sign the franchisor is undercapitalized and/or more interested in selling franchises and collecting licensing fees instead of supporting the franchisees long term by focusing on royalties from successful franchised locations.

Tip #4 – Take A Good Hard Look At All The Documentation
Once you fill out the application, the franchisor will most likely interview you over the phone or in person and then is required to issue you a Franchise Disclosure Document (FDD). Depending on the State where you live, you must have the FDD between 10 and 14 days before you can enter into any agreement or hand over any money to the franchisor. You will be asked to sign a receipt that you received the FDD and indicate the date you received it. This disclosure document has all the required information that the Federal Trade Commission (FTC) and various States require the franchisor to tell you. Please read it and reread it. Have a franchise attorney review the document and offer legal counsel regarding the franchise agreement. Then follow up with the franchisor. I would recommend that if you’re interested in moving forward, it’s now time to meet the franchisor in person (if you haven’t already) by scheduling a Discovery Day. Make a list of questions and spend the day to meet the team and get answers as well as a feel for the culture of the organization. Find out how deep the franchisor’s organization is and, please make sure you feel comfortable that the franchisor has enough experienced staff to service the franchisees.

Tip #5 – Speak With The Franchisees
Your best source of information is going to come from the franchisors customers, that means the franchisees. Call and visit as many franchisees as possible. Since many Franchisors don’t disclose Average Unit Sales and Operating Expenses in their FDD, they can not discuss it with you. Franchisors can only make claims and address financial issues published in their FDD. Be wary of the sales rep that starts telling you how much money the franchisees are making and how much money you can make. This practice of making “earning claims” not documented in the FDD is not only a violation of franchise regulation but also another red flag. However franchisees are not bound by franchise regulation and if they choose, are free to answer any question as long as they do not disclose proprietary information belonging to the franchisor, such as recipes or processes. When visiting the franchisees, build a report, let them know you’re close to making a decision and carefully phrase your questions so that they are not intrusive. I always ask about support and if they had the opportunity to “do it all over again” would they? Keep in mind there will always be a few disgruntled or struggling franchisees. Without knowing all the facts, it’s tough to condemn the system or franchisor. That said, if the majority of franchisees regret their decision or feel that the franchisor is not supportive, then you need to make further inquiries with the franchisor before signing the franchise agreement.

Tip #6 – Ready, Set, Go
Not so fast. Before the franchisor prepares a franchise agreement is it essential to discuss the best way to structure your new company. Many attornies will recommend that you not sign the franchise agreement in your name but instead set up a separate business entity such as a Limited Liability Company (LLC) or an S-Corp. Seek competent legal advice from a franchise attorney before you sign a franchise agreement or set up a new company.

Franchise ownership can provide you and your family a lifestyle that can not be achieved by working a job for a company. Building a business can be rewarding, exciting and stressful all at the same time. As an entrepreneur, I believe business ownership is the best form of work for many people.

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Photo by rawpixel on Unsplash

About the Author
Gary Occhiogrosso is the Founder of Franchise Growth Solutions, which is a co-operative based franchise development and sales firm. Their “Coach, Mentor & Grow Program” focuses on helping Franchisors with their franchise development, strategic planning, advertising, selling franchises and guiding franchisors in raising growth capital. Gary started his career in franchising as a franchisee of Dunkin Donuts before launching the Ranch *1 Franchise program with its founders. He is the former President of TRUFOODS, LLC a multi-brand franchisor and former COO of Desert Moon Fresh Mexican Grille. He advises several emerging and growth brands in the franchise industry. Gary was selected as “Top 25 Fast Casual Restaurant Executive in the USA” by Fast Casual Magazine and named “Top 50 CXO’s” by SmartCEO Magazine. In addition, Gary is an adjunct instructor at New York University on the topics of Restaurant Concept & Business Development as well Entrepreneurship. He has published numerous articles on the topics of Franchising, Entrepreneurship, Sales, and Marketing. He was also the host of the “Small Business & Franchise Show” broadcast over AM970 in New York City and the founder of FranchiseMoneyMaker.com

Six Ways to Finance a Restaurant Franchise

Six Ways to Finance a Restaurant Food Franchise…

Before seeking financing of any kind, make sure you’ve done your own due diligence. Prior to beginning your search, it’s important to know your own net worth, your credit rating, and to have a comprehensive business plan that includes pro forma documents, operations details and market comparison analysis.

Six Ways to Finance a Restaurant Food Franchise

If you are considering investing in a franchise opportunity, the very first question that may come to mind is whether you qualify financially. Most entrepreneurs, restaurant aficionados, or business executives exploring opportunities for a restaurant food franchise will seek outside sources of financing. The golden rule is to expect to contribute 15% to 30% of your own money to start with, and then go from there.

If 30% seems daunting, there’s good news. Often a franchise business opportunity is looked upon by financial institutions as less of a risk, compared to independent business start-ups. This can be further reinforced by the history and recognition of the brand name, the number of units in operation, and even the support provided to the franchisee by the franchisor.

Before seeking financing of any kind, make sure you’ve done your own due diligence. Prior to beginning your search, it’s important to know your own net worth, your credit rating, and to have a comprehensive business plan that includes pro forma documents, operations details and market comparison analysis.

Franchise financing can be complex, but it doesn’t have to feel impossible. Consider these six ways to finance a restaurant food franchise like Taboonette.

1. Friends and family, as well as experienced business owners,d business owners turn inwardly toward friends and relatives to help finance their franchise or start-up business. With this kind of financing, individuals and families get to create their own terms for repayment and enjoy the collaborative support from those closest to them.

2.SBA loans.
The Small Business Administration is a government agency that helps entrepreneurs plan, launch, manage and grow their businesses.1 They work with financial institutions to provide SBA-secured loans. A lender may be more likely to approve financing for individuals backed by an SBA loan because it is 90% secured. This means if the loan goes into default, the SBA guarantees repayment of 90% of the loan to the lending institution.

3.Bank and private loans.
Since the 2008 recession, it has been more difficult to secure bank loans or loans from venture capitalists or angel investors. A bank loan not secured by the SBA is perhaps the most challenging to obtain, but if you have a good relationship with a financial institution, a stellar credit rating and the required minimum liquid capital, it may be a good option.

4.Veterans loan.
The Department of Veterans Affairs, another government institution, offers qualified veterans financing opportunities for franchise and business loans. The program, called the Patriot Express because of its speedy process, makes loans up to $500,000 to active-duty military preparing to transition to civilian life, as well as to spouses and survivors of veterans. The loans come with the SBA’s lowest rates.2

5.Home equity.
A home equity line of credit or second mortgage is a way of obtaining financing but comes with a personal risk. Financing in this way uses your home as security. This means if you default on a business loan, you lose your home. But with sufficient equity in your home, it can be a relatively easy financing source to tap.

6.401(k), stocks and other personal accounts.
It is not unusual for people to tap into their retirement or savings accounts to help finance business ventures. In an interview with the Wall Street Journal, Bernie Siegel, founder of Siegel Capital LLC, discusses a rollover plan where the franchisee creates a C corporation that will own and operate the new franchise business. That corporation then creates its 401(k)-retirement plan. The C corporation’s 401(k) plan then purchases stock in the C corporation. The cash paid to the corporation is then used as the down payment, and the balance can then be financed through an SBA guaranteed loan.3

At Taboonette, we are excited to work with financially qualified individuals to help them reach their goal of owning a restaurant food franchise. Together we look forward to growing both our Taboonette franchisee and customer bases and bringing our delicious trademark Middleterranean® food and a unique dining experience to more hungry guests.

For franchise information contact [email protected] . “Offer by Prospectus only”

1.https://www.sba.gov/
2. http://guides.wsj.com/small-business/franchising/how-to-finance-a-franchise-purchase/
3.https://www.wsj.com/articles/SB120242422031851929