More Franchisees Getting Loans From Franchiser
More franchisers help franchisees ride out credit crunch with financing, waivers or assistance getting outside loans.
Most franchisers don’t help franchisees out with financing, but more exceptions are emerging in today’s tight credit market. Great Clips Inc., a Minneapolis-based hair-salon chain, says it has secured $14 million in loans for expansions, acquisitions, debt consolidation and refinancing for new and current franchisees.
The franchiser obtained the money from lenders InSource Capital Services Inc. of Sherman Oaks, Calif., and IRH Capital LLC, Deerfield, Ill., “in the wake of all the turmoil and fear out there,” says Rob Goggins, Great Clips’ vice president of franchise development.
Mr. Goggins says the franchiser was able to get the financing partly because of franchisees’ low default rate on previous loans. Much of the money is still available, the company says.
To attract investors to a new hotel-motel prototype, Red Roof Inn, a unit of RRI Inc., is extending a $50,000 credit against various costs, capping marketing and reservation fees and waiving royalties for seven years. The waiver, which starts when the franchisee signs up, could average $45,000 a year or so, estimates Joe Wheeling, the company’s CEO.
For the franchisers who have long offered financial assistance of some kind, the measures are taking on greater importance these days as a lot of outside lending dries up and personal assets shrink. Full article.
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