Navigating the Franchising Process: A Primer for Minority Franchisees

June 2009 Franchising World

By Aslam Khan

It is important to understand that to assist minority candidates in searching and obtaining financing, there are similarities to doing the same for non-minority candidates on the surface as you peel away the components of the stages of securing the financing, there are differences to be noted and explained.

The process of obtaining financing within any franchise concept is similar in many ways to the traditional process of going to apply for a loan. Most franchisors will assist franchisees by providing them with a recommended list of lenders who are friendly with their individual concept. This is a key fact to be aware of because it will eliminate the familiarization process of the lender with the concept and hasten the process.

All lenders, before they extend financing, will need to understand the mechanical components of the franchise business. The franchisor will have what is considered an average performance financial statement and requirements that the franchisee can share with the lender that will assist in the familiarization process. Most franchisors have a package of information that is provided to new franchisees that can be obtained by asking even if they’re not a new franchisee, but just starting the process of obtaining financing.

The required information needed to start the process is average sales per location and the average performance expected for profit. This will provide guidelines on the business as it lends creditability to financial information coming from the franchisor rather than the franchisee. Minority franchisees may be required to provide more information to establish their ability to perform at the stated level required by the franchisor. The key is providing information that will demonstrate the track record of the franchisee. It is very important that this occur so that there is no question as to ability or performance. As a minority franchisee, I had to continuously sell my performance to convince people to evaluate the opportunity and to buy into my plan of future success.

Have a Good Plan
As a minority, and speaking from experience, it is important to develop and maintain a good network of contacts that you can reach out to for assistance to help you with opening doors with referrals. They can also assist in reviewing information and preparing required business plans and projections. The ability to have a good plan that is fully developed and thought-out provides an amount of creditability to you and your ability to succeed. The lenders really need to feel that you have a well-thought-out plan to protect their investment.

The specific steps outlined above indicate that you need to provide to the lender a complete package of informational data that will demonstrate your ability to successfully pay off the loan if indeed the lender decides to extend credit to you. The first step in the process is to have complete franchise information. The second step is to have financial projections and analysis completed and be able to explain the performance. The third step is to utilize your contacts and connections in your network to assist you in opening the doors to the decision makers.

Passion and Focus
The other important factor that must be demonstrated despite which type of candidate you are, is that you need to have true passion for your business and the will to go above-and-beyond to achieve your goals. If you can demonstrate this stored-up passion to the lenders, then their belief and willingness to provide financing to you will greatly improve. It is the deep desire of the true entrepreneur that creates the success stories that lenders really like to have and be able to place in their portfolio.

Along with having the passion for your business you will need to remain focused and diligent in executing your plan of obtaining your financing. It is important to have the proper follow-up to achieving your objective. The lenders often have many loan applications in the pipeline that they are working with. Continue to stay in touch and focused on the ultimate outcome and you will have a better advantage over other candidates as they may not stay that focused and therefore not succeed in closing the deal.

It is never too late to develop relationships that last a lifetime. I can speak from personal experience because that is how my business grew. I had to remain focused on the final objective and I worked every day to achieve the successful outcome. The lenders that I have worked with in the past have always told me that the passion that I have has made me successful, so I pass this piece of information on to you in hopes that it will guide you.

The current environment has made it even more difficult to be successful in obtaining financing but if you apply the steps that have been outlined in this article you should be able to obtain financing. It is imperative that you are fully-prepared; that is the key that has been stressed here. Your overall readiness and willingness will make or break the process in obtaining the financing. You must have a “can do” attitude and show that you can do anything no matter what obstacles you encounter. If you maintain that, you can do anything as long as you put your mind to it. Then your chances of success are increased tremendously.

I extend my good wishes in your success in closing the transaction and providing for a successful process. Remember to reach out to others for assistance if your process is not going well. It is important to utilize your resources at hand.

Aslam Khan is CEO-owner of Falcon Holdings, LLC, a multi-unit franchisee of 150 Church’s Chicken restaurants, and a member of the International Franchise Association’s board of directors and the IFA Educational Foundation’s Diversity Institute board of directors. He can be reached at 630-574-2594.