Small Firms Get Local Loans

By ANJALI CORDEIRO
When Amy Loera was looking for a loan to expand her family's Mexican-restaurant business earlier this year, she applied at nine different banks. They all turned her down.
Many of the banks accepted her initial application but simply didn't take things any further, she says. Some raised concerns about the nationwide downturn in the restaurant industry in refusing her request. And some told her that if she had applied a year ago, she would have had no problem.
So Ms. Loera turned to a local lender, Arrowhead Credit Union in San Bernardino, Calif., after a business acquaintance told her the credit union had given loans to other businesses in the community. She was approved for a $643,000 loan this summer.
Ms. Loera, who runs the restaurant chain, Tio's Mexican, with her husband and brother-in-law, believes that since Arrowhead was based in the region, it was easier for her to make a stronger case about the health of her business.
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"They were local," she says. So "they were able to see that because we are a family-owned restaurant and because we had a very good formula to keep our overhead [costs] low and prices reasonable, we are picking up the slack from [fancier restaurants] around us and are not feeling a big hit from the current economic situation."
Small businesses have been having increasing trouble getting loans as the credit markets have seized up. But some, such as Tio's Mexican, are finding that smaller community banks and credit unions are more open to offering financing. For one thing, many smaller lenders are in relatively strong financial shape because they didn't make the types of investments that got many of their larger brethren in trouble.
In addition, private local lenders may be more familiar with a region's business climate, so they are better able to look beyond national trends to base their decisions on the more immediate factors affecting an individual business.
"Often times," says Sandy Baruah, acting administrator of the Small Business Administration, "the larger institutions will rely more heavily on the credit score, whereas sometimes community banks will take a much closer look at the business plan. And especially if they are based in the region or the community, they will make a decision based on their overall comfort with the business plan and presentation."
" But still, credit ratings matter," Mr. Baruah says.
All About Cash Flow
When applying for loans, Ms. Loera says she highlighted the fact that her restaurants are based in so-called bedroom communities like Rancho Cucamonga, Calif. -- where people commute some distance to work, are strapped for time, and look for a place where they can eat an affordable family meal at the end of the day.
She presented a three-inch-thick binder filled with financial statements showing the historical results of the company's existing restaurants as well as the fact that they were debt-free. The Loeras had credit ratings in the 750 range, she says.
She also gave a projection of how much money the new restaurant would bring in over the first 12 months, and a business plan that included details such as the number of employees the new location would have and the intended menu.
Ms. Loera says all that data didn't affect the decision of the banks -- but it did Arrowhead's.
Jon Parks, a vice president at Arrowhead, says the credit union approved Ms. Loera's application because the family showed they already had experience managing restaurants and were able to prove that their existing locations were financially successful.
The fact that the new eating place is being planned as an affordable family restaurant makes it more likely to succeed in the current economic environment, he says.
'Behind the Scenes'
"We are not score-driven in the business-lending side, and choose to look behind the scenes," Mr. Parks says.
He says a strong credit score -- one above 700 -- can be helpful. But the one metric that often trumps all others is cash flow. Since it indicates the amount of cash generated and used by a business over a certain time frame, it can be a key indicator of a borrower's ability to pay back the loan.
Lenders also try to gauge how a small business will do going forward. Heath Chapman, vice president, commercial banking at Morrill & Janes Bank in Merriam, Kan., which is still lending to small businesses, says companies increase their chances of getting a loan if they give financial forecasts that look realistic.
He suggests that owners include a best- and worst-case scenario for their revenue projects and for forecasts on how they will repay the loan.
For a banker, "having all those questions already answered helps," he says.
Case by Case
Certain industries that have been particularly hard hit by the weakening economy may face added pressure to prove that their earnings are strong enough to withstand the downturn. But institutions that are still lending to small businesses tend to take each application on a case by case basis.
"Those industries that have been hit the worst -- construction, auto dealerships -- we are going to look at with a logical eye and understand what we are up against the next 12 to 18 months," in terms of the outlook for the overall industry, says Mr. Parks.
"It doesn't mean we are not going to lend to them if the numbers dictate and everything makes sense," Mr. Parks says.
He believes there could be pockets or individual businesses that continue to do well even within such sectors because they have some kind of a niche offering.
Some community lenders aren't completely dismissing even those businesses that face some financial hiccups. Mr. Chapman says he is asking small-business clients to come to him as soon as possible with financial problems or difficulty funding losses.
He says he is willing to consider lending to small businesses that face some difficulties if they have a history of overcoming problems in the past.
Write to Anjali Cordeiro at anjali.cordeiro@dowjones.com

MARKETCORP and Francorp invite Franchisors to sell more Franchises through the “Own Your Own Business” Seminars, beginning in Atlanta, GA

MARKETCORP and Francorp invite Franchisors to sell more Franchises through the “Own Your Own Business” Seminars, beginning in Atlanta, GA

MarketCorp International, Inc. is teaming up with Francorp, the world’s largest Franchise Development Company, to assist Franchise companies in selling more franchise locations in the marketplace. Franchisors can now become part of the “Own Your Own” Business Seminar Program, making themselves available for increased sales to potential buyers, who want to own their own business.

The first seminar will be held in Atlanta, GA and is Free to the public, with no cost to the attendees.The “Own Your Own” Business Seminar is a (2) hour, 100 slide presentation, highlighting the advantages and disadvantages of the three major ways of owning a business:
1. Starting a business from scratch, 2.Buying an existing business, 3. Buying a franchise. All critical components of running a business are covered, such as advertising, taxes, licenses, employees, state & local laws, financing, sales, accounting, vendors, market trends, business statistics and much more.

This is the most powerful teaching tool in the industry. The event is held in a very prominent, professional hotel meeting room and heavily advertised in local newspapers, internet, direct email and by word of mouth.If you are a participating franchisor in the seminar, your company will be highlighted and discussed in detail, at the end of the slide presentation, with your accompanying marketing material handouts. MarketCorp will then set up personal interviews with each attendee, to discuss their franchise interests, usually held that evening and the next day. The ultimate goal of the seminar, is to match qualified buyers with franchisors, in a meeting to be held at the franchisors corporate office. Ultimately, MarketCorp will assist in closing the sale and getting a Franchise Agreement signed and a check for Franchise Fees. In addition, all participating franchisors will receive a list of the contact information for all attendees.We are limiting the number of franchisor companies to be represented in the seminar, to a total of (8). Our goal is to have (8) non-competing franchisors, in different offerings. Our long range goal is to take this seminar to several major cities throughout the U.S. in 2009.

It is our belief, that in this economy, now more than ever before, there are more people available who want and need to own their own business. The jobs they once had, are no longer available. Small business franchises are the answer and face-to-face presentations through education, will produce favorable results.

If you are interested in being a participating franchisor, please contact Kent Boxberger, President & CEO of MarketCorp International, Inc. on his direct line at: 678.462.8646 and visit their website at: http://www.marketcorp.net/

Time is of the essence, as we’re planning the first seminar in Atlanta, GA in late February 2009.

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Brian Scudamore, Founder 1-800 Got Junk

December 2008 Franchising World It is critical to build a foundation of strong systems and support that will set franchisees up to be profitable. By Brian Scudamore

Successful franchisors have found the last few years to be very rewarding. A quick look at a few industry statistics shows just how significant franchising is to our economy.

Research released earlier this year by the International Franchise Association found that in the United States alone:
• Small franchised businesses generated more jobs between 2001 and 2005 than several of the nation’s major economic sectors.
• During that period, franchising expanded by over 18 percent, and its direct economic output increased by more than 40 percent.
• The franchise industry in 2005 included more than 900,000 establishments generating 4.4 percent of the U.S. private-sector economy.

Yet despite the booming nature of the industry, many established franchisors have more sobering thoughts in their minds: the economic turmoil that has defined the last half of 2008. Not exactly a fortuitous environment for a franchisor poised to cross the threshold of 100 units. So what does a franchisor do to stay on target for a new level of growth, particularly in an economic downturn? There are five common mistakes franchisors planning to grow beyond 100 units must avoid. However, given the current economic conditions, here’s a colossal sixth mistake that is critical to address today: Letting the economy hold you back

Times of economic turmoil are actually some of the best during which to focus on growth. Maintaining the success and profitability of existing franchisees becomes more vital than ever before, which means concentrating on strengths–the systems that helped build the company from infancy to establishment. What better example for a potential franchisee than franchisors that showcase their top performers? Identifying and cultivating best practices will “wow” the right candidates and help you award more franchises, despite the economic picture. In addition, the top achievers in any franchise system become role models for those franchisees who aren’t yet performing at their peak. Focusing on alignment and best-practice sharing will strengthen the entire system and help boost the results of under-achievers. The spinoff benefit is that this is a very attractive and efficient franchise system for a prospective franchisee. Now here are the five common mistakes franchisors seeking to grow beyond 100 units should avoid. Lacking vision

A vision is a compelling, crystal-clear picture of the franchise in the future. It defines every element of an organization’s success and guides franchisees and employees toward common, realistic goals. Vision is the most important leadership tool a franchisor can master because it charts a clear path to successful growth. While many entrepreneurs keep their vision in their heads, either to prevent someone from copying it or because they don’t have enough faith to share it, some entrepreneurs don’t have a vision at all. Lacking vision is a grave mistake, and a surprisingly common one. Even an out-of-this-world business concept can only take a franchisor that has a weak vision, or worse, no vision at all, so far, and certainly not beyond 100 units. Great ideas are really only as good as the vision that guides them. So what does a solid vision look like for a successful franchise looking to grow beyond 100 units? Check your vision against these four criteria:

• Vision must be attainable: Franchisees will invest their livelihood in a solid franchise business with proven systems, but not if the vision for the company is unclear or unrealistic. Employees are the same. They will buy into a great vision, but without a steady guideline of where they’re going, they’ll drift.
• Vision must be well-articulated: A well-articulated vision is one that includes all facets of a business. It is more than ”who will do what by when?” It speaks to the company’s core beliefs and values. It paints a broad and colorful picture about how the business looks, acts and feels at various points in the future.
• Vision must be shared with passion: A vision must be shared with passion, and to as many people as possible: Current and prospective corporate employees, current and prospective franchisees, the media, friends, family, neighbors and so on. Why? The passion with which true vision is imparted will propel the franchise toward achieving it and attract constant interest from others.
• Vision must be revised often: Franchisors do not want to run the risk of becoming complacent, growing too fast, choosing the wrong people or neglecting important systems. A strong vision, reviewed on a regular basis, will ensure the organization is on the right track. Complacency Many successful franchise entrepreneurs reach a point where they say, “Success has come so easily,” and they believe it will continue to be so. Perhaps a phenomenal business concept has catapulted the organization into “mostwatched” status in the media. Everybody wants a piece of the company. It’s a heady feeling for a franchisor which can lead to a premature sense of security. The belief is that the hard work of building out strong systems, hiring great people, and getting the expansion strategy down on paper has been done. The flywheel has momentum. Franchisees are posting record satisfaction scores. Employees are engaged and motivated. This is a peak moment in the life of a franchise. However, a word of caution: it’s also a pivotal moment. All businesses face unexpected challenges. Now is not the time to become complacent, yet now is often the time when many franchisors do. Now is the time to be hyper-vigilant about every aspect of the business. Complacency can be a deadly mistake for successful franchisors poised to transition beyond 100 units. One of the most common indications that a franchise is leaning toward complacency is expanding internationally without performing adequate due diligence. It is always tempting for any business to answer calls for its service or product in a new international market. Franchises today are expanding internationally at a much faster rate than in the past. The common pitfall is believing what worked here will work as well there. Not so. Even the most common expansion markets such as Australia and the United Kingdom, present different cultures, consumers, market trends, economic climates, labor laws, and business expectations. Franchisors must approach international expansion as though devel oping a new franchise business, albeit utilizing the foundations of a strong franchise model, rather than taking the complacent attitude that success here will easily translate into success there.

Growing too fast
Franchising is widely believed to result in fast and easy growth because it uses other people’s money to build out infrastructure. Franchising requires a proven business model, strong systems and the right people–things that take a lot of time to develop. For many entrepreneurs, particularly those who are impatient by nature or who have fallen into complacency through their success, it’s easy to make the dire mistake of growing too quickly. To ensure the franchise system is on target for healthy, sustainable growth, a franchisor must filter everything through the following two-part question: Is there an appetite in the market that warrants the business growing beyond 100 units and can the existing infrastructure sustain such growth? Franchisors must understand with absolute clarity why expanding beyond 100 units is the right move for the brand and for the franchise system. It is critical to build a foundation of strong systems and support that will set franchisees up to be profitable. Happy, successful franchisees paint a positive picture of the entire system, which will attract new candidates and foster growth when conditions are favorable.

Choosing the wrong people
Failing to hire the right people to grow a franchised business beyond 100 units can be a fatal mistake. Hiring the right people pertains to all areas of a franchise system: the franchisees, the franchise leaders, and all employees. Franchisors must never compromise on the quality of their franchisees. A helpful way to ensure this doesn’t happen is to get used to the concept of awarding, rather than selling franchises. An organization seeking to attain critical mass must avoid bringing on franchisees merely to hit their quota. It is not enough for a candidate to bring a lot of money and a business degree into the interview room. Dig deep to discover if the candidate has the business drive, experience, stamina and passion to go along with their investment and education. Due diligence is significant with franchisees because they are a lot more difficult to exit than the wrong employees are. In the early days of a franchise, enthusiasm may be impetus enough to motivate employees to succeed and grow. Many, including budding leaders, learn the ropes along the way, growing up with the business. But once a franchise has reached a size of close to 100 units, it’s time to shop for the best–the experienced leaders with a track record of building companies of substantial size. Too many entrepreneurs hold back for fear of letting a faithful, hard-working leader go, when the best solution is to allow the leader to thrive in another start-up and make room for the star who can commandeer the franchise to new levels of growth.

Inadequate systems
It is a deadly mistake for franchise organizations to consider significant growth without proven, established systems. Strong systems are the operational building blocks that grow the business. By the time most franchises are planning to expand beyond the 100-unit mark, the time for trial and error of major systems has passed and the era of proven, scalable systems has arrived. On the path to building a business, there are so many valuable lessons. Wellknown professional sales coach, Jack Daly says: “Inspect what you expect.” It’s a simple, catchy phrase that serves as a reminder to always stay on top of company systems. The mistake of complacency often leads to issues with missing systems, but inspecting what you expect ensures those missing systems are caught and tightened in a timely manner. To facilitate growth, successful franchises must have a process to uncover deficiencies. Systematizing the process of inspecting is simple. It involves creating a list of the key, measurable components of the business, then making people accountable for achieving and monitoring them.

If you’re looking to grow beyond 100 units, you’re at a very exciting time in your business. I remember when I awarded the 100th 1-800-GOT-JUNK? franchise. It was a goal I’d had my sights on since the inception of the business and it was a huge achievement for me. Today, 1-800-GOT-JUNK? has more than 275 franchises across North America and Australia, and I have my sights set on 500 units. But all of the common mistakes I outlined here still apply to my business even today. Maintaining the health of the existing system while pursuing expansion can be challenging. However, with laser focus on the foundational pillars of any business: vision, people and systems, the pitfalls can be avoided and the results are very rewarding. Brian Scudamore is founder and CEO of 1-800-GOT-JUNK? He can be reached at bscudamore@1800GOTJUNK.com  .

Franchising in a Down Economy

By Jeff McKinney • jmckinney@enquirer.com • December 19, 2008
Downsized by the mortgage meltdown, Al Cooper suddenly was forced to find a new job.
Cooper, formerly vice president and director of operations at Fidelity Mortgage for five years, lost his job in November 2007 after the subprime debacle led to liquidation of the company. Cooper, a divorced dad with three boys, needed work and to stay here.
He used about $25,000 in savings last month to launch Caring Transitions, a home-based franchise that offers estate sales and other services for senior citizens and their families.
Cooper, 50, said he liked Caring Transitions because its business model was less risky than other companies and offered more potential growth with baby boomers aging.
"I also was concerned I would not be able to find another job in the corporate world due to my age and experience," Cooper said.
Welcome to the franchising world in a sour economy. Cooper joins other former executives from around the country who have decided to become franchisees.
When you buy into a franchise business, you get marketing, advertising and training support you typically do not get with an independent business, said Alisa Harrison, spokeswoman at the International Franchise Association in Washington.
She said a franchised business allows an entrepreneur to take advantage of a proven business model and a proven brand.
"In good times and bad, a franchise allows you to go into business for yourself but not by yourself," Harrison said.
And with a recession-like economy, entrepreneurs say franchises allow you to be your own boss and control your destiny.
In a weak economy, Harrison said, you have a workforce that's been laid off, and many of these people are taking their severance to start up franchises.
But potential franchisees also should be cautious before jumping into business.
Chuck Matthews, executive director of the University of Cincinnati's Center for Entrepreneurship, said one of the cons of buying into a franchise are the initial costs, including the franchise fee, investment cost and royalty payments.
But on the other hand, he said, a franchisor often will provide financial assistance to a qualified franchisee to start the business.
He said potential franchisees also should be careful with such things as restrictions on their sales territory, what items they actually can sell and shared costs tied to marketing support.
"It's critical that you do your homework before starting a franchise, particularly in a weak economy." Matthews said.
Jody Wallace, formerly a stay-at-home mother, and her husband, DeWight, opened a Pump It Up franchise 3½ years ago in West Chester Township.
The business offers a giant, indoor, inflatable playground that offers private parties for children.
The couple invested about $400,000, including franchising rights, equipment and build-out for the business. DeWight still works for a large local company.
Jody said the business allows her to do her part in generating income for the family, while using her event-planning skills to help make kids happy.
She said the franchise allows her to offer services she could not provide with her own business, including an art camp for kids and corporate team building for adults.
"A franchise offers you the support you need in one package."
Also wanting more financial security, Becky Gabbard turned her love for animals into a business. She invested $10,500 to launch a Fetch! Pet Care franchise in October.
The business provides professional at-home pet-sitting, dog-walking and other services.
"It's a very lucrative business and it provides a service people need regardless of the economy," she said.
Harrison said her group represents franchisees ranging in age from 25 to 85, and franchises that range from pet-sitting services to automotive stores like Jiffy Lube.
She said individuals can open a franchise for as low as $20,000 and high as $2 million. Harrison said the figures include upfront costs.
Harrison said the biggest challenge facing potential franchisees now is getting credit and affordable financing.
Author Jim Coen, who has been in the franchising business for 25 years, agreed.
He said the recession could be limiting the number of franchisees because of the credit crunch.
"It's not as easy today to get a deal financed as it was a year or two ago," he said.

Dunkin' Donuts sells out Mobile franchises

Dunkin’ Donuts announced Wednesday that it signed a development agreement to open 40 restaurants in Mobile and Pensacola, Fla.

In the deal with Gulf Coast Franchise Group LLC, six restaurants will open in Mobile and three in Pensacola in 2009, with the rest opening in the next six years.

Continue to read at:
http://www.bizjournals.com/birmingham/stories/2008/12/08/daily29.html

Howard Shultz Interview

Interesting interview with Howard Shultz.

http://www.comcast.net/data/fan/html/popup.html?v=955785747

Franchise Brands buys HomeVestors

Franchise Brands LLC has bought majority ownership of HomeVestors of America Inc., the company behind the "We Buy Ugly Houses" billboards.
Terms of the deal were not disclosed.
Founded in 1989, Dallas-based HomeVestors sold its first franchise in 1996 and has grown to a national franchise that specializes in buying homes that need repair. HomeVestors' network includes more than 230 franchised offices in 35 states. The company said its franchisees sell most of the houses to other investors and first-time home buyers.

Continue to read at:
http://dallas.bizjournals.com/dallas/stories/2008/06/09/daily15.html

Franchise India ties up with Francorp

Franchise India ties up with US-based Francorp
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New Delhi, Dec 2 (IANS) City-based Franchise India Holdings Ltd Tuesday announced it has entered into a partnership agreement with the global franchise consultant major Francorp Inc of the US to attract more companies to India through the franchise model.
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New Delhi, Dec 2 (IANS) City-based Franchise India Holdings Ltd Tuesday announced it has entered into a partnership agreement with the global franchise consultant major Francorp Inc of the US to attract more companies to India through the franchise model.
Announcing the licensing agreement here, Franchise India president Gaurav Marya said: 'We are in talks with a number of international brands' to bring them to Indian market.
The new partnership company will be called Francorp India and will open four offices in Delhi, Mumbai, Chennai and Chandigarh.
'There are a lot of companies in the services sector that are actively looking at India to set up their franchise operations,' Francorp International president M.F.M. Ramon Vijay said.
Talking about the growing popularity of franchise model among Indian business men, Marya said: 'Earlier people used to park their funds either in the stock markets or buy real estate to get a decent 30 percent return. Now because of the economic slump, these avenues won't get them such high returns and people are now looking at less risky ventures to invest. Franchise is such a business.'

Francorp Clients - Maui PlayCare

Kid relief
Maui PlayCare offers stress-free child care
By Adam ElrashidiAs published in: Franchise Times - November-December 2008
A Montana transplant to Hawaii hopes that parents and franchisees will say "Aloha!" to her drop-in day care franchise.Hawaii gave the world hula dancing, macadamia nuts and Don Ho. Now you can add stress-free, drop-off childcare to the list, thanks to Bonnie McCarthy's franchise, Maui PlayCare.
A Montana-transplant, McCarthy quit her job in construction safety and office management to become a stay-at-home mom shortly after her last two children were born, but found that she had less time for herself. "It just became a way of life where I didn't even have a minute to even think," says McCarthy.
McCarthy didn't like the idea of leaving her kids with babysitters and didn't want to pay the membership fees and high rates at day-care centers when she only needed an hour or two a day. So in 2002 she came up with the concept of Maui PlayCare - a center where parents can leave their children for an hour or two, or for the full day.
The concept is simple: Maui PlayCare provides parents running to the grocery store or a doctor's appointment with a place they can safely leave their children for a short amount of time. There's no reservations. No membership fees. No unadjusted hourly rates. Maui even provides parents with a to-go pager for an added sense of security.
Bonnie McCarthy's own child care problems led her to create Maui PlayCare in 2002.Maui PlayCare is structured around the "Aloha Spirit" - an attitude akin to "Southern Hospitality" that emphasizes community service, fun and relaxation.
Additionally, Maui provides children with a fun environment they can enjoy at their own pace. Children play in secured-access playrooms that are monitored by attendants. Kids are given healthy snacks, and can participate in activities as they wish.
The company also has a program to help kindergarten-age children transition from being home all day to being in the classroom. Children are left in Maui's care for intermittent periods of time, allowing them to learn that even though their parents are gone, they will be back.
"By the time school comes around and they drop them off, the child is used to it - they know mommy is coming back, it doesn't disrupt the teacher or the classroom," said McCarthy. The franchise's main location cooperates with a local community college to provide tuition assistance for college students with children.
McCarthy began franchising the concept last year after receiving numerous inquiries from tourists who were able to take advantage of her services while on vacation. "I had people from Texas, from Florida, from New York coming to me and saying there's nothing like it (on the mainland)," said McCarthy. "I had people asking me, 'Is this a franchise?' 'Do you sell franchises?' - so I started educating myself on franchising, and I decided that this was something I wanted to do."
At a glance
Initial Investment: $137,000-$221,000
Franchise Fee: $40,000
Royalty: 7 percent
Ad Fee: 6 percent local
Units: 1Maui PlayCare has a no-brainer sales pitch to prospective franchisees - each unit comes with its own trip to Hawaii. McCarthy trains new franchisees herself at the company's Maui headquarters.
That's not the only reason Marilyn Alexander, a retired child welfare worker, was interested in the concept. The Oklahoma City franchisee said the concept allowed her to begin working with kids again.
"If I would have had something like this when my kids were growing up, I would have used it - a lot," said Alexander. "Just thinking about going to the supermarket (now), and looking at some of these moms who are so stressed out because they've got three kids hanging off them, wanting this, wanting that; and these moms are just barely making it through."
Currently, Maui PlayCare has two units in development, one in Oklahoma City and another in Scottsdale, Arizona. McCarthy said she plans to have 20 more units signed in 2009, with roughly 10 to 15 open or under construction by the end of that year, plus another 50 deals signed by the end of 2010.