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No one understands the new role franchisors must play in financing better than John Teat, managing director of franchise finance for Primrose School Franchising Company. Primrose may be the only franchisor in America with a team member dedicated to finding funding for franchisees. Undoubtedly it’s a role more franchisors will need to create and fill.
I recently interviewed Teat during the Texas Franchise Leadership Tele-Forum. He made the following points of interest to franchisors:
- Today, franchisor/lender relationships are absolutely critical. While it’s location, location, location in real estate, it’s relationship, relationship, relationship in franchise financing. It’s who you know, and if you’re a franchisor that doesn’t have a network of bank and lender relationships, it’s time to get started!
- Work with lenders who are familiar with franchise lending even if they’re not familiar with your brand. And, it’s important to work with decisions makers. Business Development Officers are not decisions makers. Work with someone who’s at the executive VP level or higher.
- Set up an initial meeting with the lender and plan to ask questions about the lender and the bank. Learn about the lender’s credit culture. What’s their “put thru” system like? Is there a fit between your company and the lender? Lenders are impressed by franchisors who want to know about their needs.
- Let the lender know you’re not coming with hat in hand. Explain that you currently have lender relationships (if you do) but the recession has dictated that you create more “bench strength” among lenders.
- Ask for the lender’s assistance. Create a team spirit with the lender and work collaboratively to put together a funding plan for your brand. Get the lender involved in your business! Invite the lender to your office; to your conferences.
- Once you have a program in place with a lender, make certain you send the lender only prospective franchisees and existing franchisees that meet the criteria you and the lender established for the program! The worst thing you can do now is to send the lender a candidate that doesn’t qualify. Be sure to include the lender’s criteria in your franchise sales process.
- Stay on top of the “put thru” system with the lender. Remain involved. The lender will look to you for help.
The audio recording of my interview with John Teat, and with Mike Signorelli, senior vice president of Southwest Securities, will be provided to all members of the Franchise Leadership Forum.
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