Franchising World June 2012
By: Reginald Heard
Prolonged economic challenges and a tight job market have forced many would-be job seekers to re-evaluate the course of their career paths and explore business ownership opportunities in franchising. There are 5,000 established systems of which about 3,500 are actively franchising, according to FRANdata. Entrepreneurs seeking business opportunities in franchising are best positioned to evaluate a broad selection of established franchise systems that best matches their particular interests and complements their background experiences. Making the choice to pursue business ownership through franchising provides many people with a streamlined “speed to market” approach with a system that has a proven track record and a market brand identity.
Seeking Minority Candidates
Minorities and minority communities are currently experiencing crisis-level unemployment rates at historical lengths. However, with the vibrant entrepreneurial spirit that minority groups bring to seeking business ownership opportunities, franchising has become an increasingly preferred alternative career choice. Minorities with diversified backgrounds–ranging widely from corporate business, professional sports, health care, the military and more–along with various work and educational experiences, are becoming self-employed through opportunities in franchising. There are also many franchise systems that are actively seeking qualified minority candidates to support their systems’ growth and to support entry into new underserved minority communities. Minorities in franchising are well represented in single-unit and multiunit ownership, as well as being area developers, suppliers, business coaches and franchisors, to name a few. A minority-owned franchise system such as Golden Krust Caribbean Bakery was founded in 1989 and now has more than 115 operating units.
The MinorityFran Initiative, www.franchise.org/minori tyfran , sponsored by the International Franchise Association, is a valuable resource to locate and identify those participating franchise systems that are actively seeking qualified minority franchisees, employees, and suppliers and partners to expand their systems into minority communities.
Returning Military Veterans
Much of the nation’s attention is focused on hiring military veterans that have proudly protected the United States and are now returning in significant numbers to civilian life after serving extensive tours of duty in supporting two significantly long wars. Approximately one million veterans are estimated to exit the military by the year ending 2015. There are many corporate-sponsored job fairs across the country targeted to hire veterans. However, honored servicemen and women are returning home to find themselves seeking employment in an already tight job market. The franchise community has for many years recognized the inherit synergies with military veterans and franchising. Veterans have a proven track record in franchising, structure and systems. In fact, the need for leadership has led to 66,000 veteran-owned franchise businesses.
According to IFA, under its Operation Enduring Opportunity initiative, about 1,200 of its identified franchisor and 600 of its supplier members report that they will recruit or hire 75,000 veterans and military spouses in addition to 5,000 wounded veterans by the end of 2014. VetFran, www.vetfran.com , an IFA- sponsored program involving participation by its member franchisors and suppliers, is a valuable resource to assist veterans in learning about franchise opportunities, financial assistance, and to locate and identify the participating franchise systems that provide incentives such as discounts or waive initial franchise fees or offer other valuable incentives to veterans that become new franchisees and to support these returning veterans with the transition into business ownership.
Financial Market Meltdown
The crisis in the U.S financial markets and banking system resulted in a credit access freeze to most businesses. The banking system simply stopped funding new loans to consumers and businesses regardless of credit quality. The continuous access to capital is essential to the health of the overall franchise industry to support new and expansion growth.
The Small Business Administration and its participating bank partners played an essential role during the financial market crisis that allowed banks to continue making loans to small businesses. The SBA’s popular loan programs–7(a) Program, 504 Loan Program, SBA Express Loans, and its Patriot Express loan program for military veterans–have always been widely used to support new and expansion projects in franchising. The comprehensive SBA loan programs provide the greatest match to support the broad investment range and types of franchise concepts. During the meltdown in the financial markets, the SBA came to the aid of small-business owners by strengthening its popular SBA loan program features to give U.S. banks greater incentives to continue making new business loans to stimulate the economy to preserve and create new jobs. During this crisis, the SBA loan program became very popular and in many situations was the only absolute lending option. The enhanced and extended benefits of the SBA program included increased loan loss guarantees from 75 percent to 85 percent and up to 90 percent to participating banks. It also included substantially reducing lender risk, temporarily waiving 2 to 3 percent SBA fees paid by borrowers to reduce borrowers cost, and increasing the program-eligible loan sizes from $2 million to $5 million to provide capital access for existing business owners with plans to expand operations and to support larger projects, and the ability to refinance other business debt to more favorable terms. The continuous national support and financial viability of the SBA loan programs are equally in line with the overall health and continuous growth of the franchise industry.
The U.S. economy is resilient and once again has proven that it has diversified strengths to meet any challenges. It is also the human spirit and determination of its people that drive this economy. The opportunity and timing could not be greater for existing franchise system operators to expand their businesses and for new potential entrepreneurs to give strong consideration for business ownership in franchising. Franchise systems have established successful business models and are actively seeking to expand their systems with hard-driven, new system operators and operators that can support them in expanding their brands into new markets. There are many professionals dedicated to the franchise industry that are passionate about sharing information and best practices in almost every area of interest. The SBA and its participating bank partners and other conventional lenders that actively finance franchise transactions are in the market actively seeking qualified projects. Entrepreneurship through franchising provides an inherit network of support systems with a vested interest in your future success.
Reginald Heard is president of Bankers One Capital, a franchise financing firm that provides advisory and loan placement services to support system operators and established franchise systems. He can be reached at 203-791-9998 or email@example.com .