Franchising Facing Shakeout
The franchise industry is likely to go through a huge ownership shakeout over the next 12 to 18 months and will require a large surge in capital, says the head of a major advice group.
Adrian McFedries, the head of DC Strategy, which advises major clients such as Boost Juice, Fernwood Women’s Health Clubs and Mortgage Choice and is expanding into the US, believes that it’s the season of the seven year itch as more franchisees look to on sell their businesses and corporate executives, made redundant, seek to find a job through purchase.
Rod Nuttall, National Account Manager of corporate financial services for the Commonwealth Bank, agrees that the pressure for funding will increase over the next decade.
”The franchising sector is growing more rapidly than GDP over the past ten years; it’s an expanding market and therefore a larger slice of the economy,” he says.
Some lenders have established accreditation programs for franchise systems, which allow automatic approvals on a franchise business loans.
For example, if a Subway franchise was worth $300,000, Nuttall’s team would lend up to $210,000, based on a multiple of the earnings.
Fernwood Women’s Health Clubs says their accredited finance will cover 50% of the average $800,000 purchase price from any of the major four banks.
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