Where Can You Find Franchise Financing In 2012?

McDonald's franchise location
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We sat down with Robyn Gault, vice president of strategic accounts at Direct Capital, just the other day. She filled us in on some of the hot trends in the world of franchise, which we present to you now.

It’s going to be a big year for franchises everywhere.

The entire segment is expected to grow in the months ahead, and established and up-and-coming franchises alike are expected to take off. If that sounds like genuine optimism, it is, especially after the steady growth of 2011.

“There has been a lot of success in the last 12 months,” Robyn Gault told us.

So what lies ahead? To find out, we sat down with Gault and ran through expectations for 2012. Here’s what PointBlank learned.

Franchise Trends

One trend that stood out was that of re-models. For many moons, franchisors had been offering extensions and incentives to get franchisees to re-model their locations. In 2012, that’s changing, with many franchisors now lifting those carrots and more heavily leaning on the requirements and timelines that are contained in the franchise agreement.

The good news? Getting those re-models done now can give your franchise a huge boost. Gault said that many franchisees may see a 10-20 percent increase in sales following a re-model, which helps a franchise comfortably cover the cost of the re-model, and then some.

That doesn’t mean franchisors have totally moved away from incentives, however. New store development is something franchisors are pushing for, and they’re offering reduced royalty payments and subsidizing equipment costs to entice strong multi-unit operators to expand.

Financing In 2012

Direct Capital’s financing plans for 2012 reflect the strength of the market. Gault said she expects a considerable demand for working capital*, and noted that there are pre-approved working capital programs in place from $15,000-$50,000 per location for many of the leading national brands Direct Capital supports. That kind of financing can help franchisees boost cash flow on a short term basis to get through the slowest times of the year.

Because so many franchisees will be putting together re-models and will need financing, Gault noted that another trend at Direct Capital has been a demand for reduced payments during the downswing. In essence, large payments are deferred until business picks up in a big way, which helps a franchisee make it through the lean months.

As Gault notes, “our deep understanding of the brands we work with allow us to create uniquely structured payment options that provide a great solution to common cash flow fluctuations.”

Given the general struggles franchisees have experienced getting financing, the fact that lenders like Direct Capital are offering specialized financing can only be a plus. In what’s likely to be a big year for franchises, that’s even better.

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*Working capital not available in the following states: AK, DE, ND, VT