Veterans in Franchising February 2018 Franchising USA 6#4 3 by CGB Publishing

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Veterans in Franchising february 2018

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vets in franchising

â&#x20AC;&#x153;rewards follow the workâ&#x20AC;?

How my Military background guided my success in the franchise industry Franchising USA

SAME DRIVE. DIFFERENT BATTLEFIELD. TAKE THE NEXT STEP > VETFRAN.COM OFFERING FINANCIAL SUPPORT, TRAINING & MENTORSHIP Veterans interested in franchising can take their skills learned in the military to successfully own and develop small businesses. Learn more and support veterans in franchising at www.vetfran.com.

• 650 franchise companies participating • 151,000 veterans and their spouses found careers in the franchise industry • 5,100 veteran franchise owners

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Are you a veteran running a successful franchise? Our VETERAN READERS could use your EXPERT ADVICE! Share your tips for success and provide new Veteran franchisees with the advice they need to be successful in franchising.

Franchising is a great choice for Veterans. Tell our VETERAN READERS about your concept and why it’s a great fit for veterans. What’s unique about your franchise? How does your Veterans Program work? What areas are you currently targeting? All this and more can be covered in our unique package that gives you FREE follow up editorial in a following issue of choice if you book our VETERANS COVER STORY!

V E T ER A NS I N FR A NCH ISI NG

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A mer ica’s S w imming Pool C ompa ny ( ASP )

POOL FRANCHISE LOOKING TO EXPAND OFFERS VETERANS VALUABLE DISCOUNTS

Veterans can enjoy year-round savings from the United States’ No. 1 swimming pool repair, maintenance and renovation company, but a lucky few get even more. That’s because every year around Veterans Day, America’s Swimming Pool Company (ASP) holds a contest among veterans vying to become franchisees and waives the entire fee for the winning veteran. Two runners up also receive a 50 percent discount on the franchise fee. And during the rest of the year, all veterans enjoy a 15 percent discount on the franchise fee, Jef Flournoy, VP of Franchise Sales and Development at ASP, explained during a recent interview. At the moment, the Macon, GA-based franchise has about a dozen veteran owners among its 99 franchise locations.

Flournoy praised the great work ethic of veterans and called them not only great business owners, but great leaders within the ASP family.

Great for Customers and Owners Founded by current CEO Stewart Vernon in 2002, ASP has been franchising for the past 12 years. With the swimming pool industry being so fragmented and offering a relatively low quality of service at the time, Vernon saw the opportunity to create a company that would become a national brand in the industry that promised professionalism, stellar service and the use of the latest technology for both customers and franchisees alike. On the consumer side, ASP has Pool Ops. With Pool Ops, franchisees can schedule appointments and then track those service calls. When service is complete, Pool Ops will send a complete report via email to a pool owner outlining everything that was done to their pool — from a simple cleaning to any maintenance they

a business from marketing to billing to running QuickBooks. After Pool School, brand new franchisees go through ASP’s Guerrilla Action Marketing Plan for another 10 weeks of training. This training is a little less demanding, consisting of a call once per week with an ASP operations team leader. “We really want franchisees to get off to a good start and get into good habits,” Flournoy said. Along with a local marketing team, the company has a national PR ﬁrm that supports franchisees, plus staff at headquarters who handle technical questions from franchisees throughout the day. Regional round table meetings are held where franchise owners get together to discuss best practices and build relationships between each other. Flourney described those as meetings where six to 13 people who are all involved in the pool industry gather in a room to share their best ideas and best practices with the goal of making everyone a better business person.

requested — along with a time-stamped photo of the clean pool or the piece of equipment that was worked on. From this report and photo, the owner knows for certain the service was completed. The report even gives details like which chemicals were used to balance the water, how much of the chemicals were used and which technician completed the work.

VETERANS in Franchising Page 45

SEPTEMBER 2017

Lastly, the annual owners meeting lasts for two days and is a smorgasbord of information for franchisees where industry vendors give presentations on the latest technology in the swimming pool market.

Nationwide Expansion Flournoy himself is a former ASP franchisee. About 10 years ago, right before his wife enrolled in dental school in Augusta, GA, he bought an ASP franchise in that city and ran it for about eight years while his wife attended school. After she completed her pediatric residency, she received a lucrative job offer back in Macon where the couple were both from. Flournoy sold his ASP franchise, the couple moved back to their hometown of Macon and he immediately called ASP and requested a job on the corporate side of things where he remains today.

On the franchisee side, ASP boasts a comprehensive training program and a strong support system. For 11 days from 8:30 a.m. to 6 p.m, franchisees attend ASP’s Pool School on its campus in Macon, which features 14 working pools that have every kind of pool equipment conceivable. But, Pool School isn’t actually the beginning of their training. “Before Pool School starts, they would receive between 30 to 35 hours of what we would call pre-Pool School training,” Flournoy explained. Much of this training happens online.

Typical ASP franchisees are between 25 and 55 years old and have to be willing to follow the franchise system. They do not need to have swimming pool experience, Flournoy noted, but will usually have

At Pool School, in addition to the hands-on maintenance training, franchisees receive instruction in every aspect of running

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For information on how to submit a VETERAN EXPERT ADVICE byline, please contact editor@cgbpublishing.com

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“We really want franchisees to get off

a good start and get AS PtoPO OL into good habits.” FR AN CH ISE LOO KING

some kind of customer service or sales experience, although that’s also not

required. But they do need to possess an undergraduate degree.

- Jef Flournoy

Right now the franchise is in 21 states, TO EXPA ND but the VP of Franchise Sales andOFFE RS ASPVETE starts as a predominantly homeRAN S grows into based business and generally VALU Development is expecting to expand that. ABL E DISC OUN a business that requires a small TSofﬁce and “In the next three to ﬁve years, we should warehouse space, Flournoy noted. While be in 30 to 35 states,” he outlined. it’s not really a retail franchise, some The only places the franchise is franchisees have added a retail element to completely sold out is in Dallas, Atlanta, their businesses. Orlando and in Montana. For veterans looking to become business

MI LITARY SK ILL S

owners, America’s Swimming Pool Company offers great opportunities and for a lucky few, an amazing opportunity at particularly interested in expansion in OPE NED savings getting started. THEwhile Houston, Memphis, Richmond, VA, Las DOO R TO LEAD ERS Vegas and Tampa, FL. www.aspfranchising.com HIP There are franchises available everywhere else throughout the country and ASP is

ROL E

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what’s new! Big Whiskey’s Wrapped Up a Stellar Year of Sales Growth, Franchise Expansion, and Community Givebacks

With new franchise deals, expanding markets, and strong sales growth, 2017 was an eventful year for Big Whiskey’s American Restaurant & Bar®! Last year brought record-breaking numbers and several milestones for the Southwest Missouri-based restaurant brand. In March, Big Whiskey’s opened their first franchise location in Bentonville, AR, experiencing record-breaking sales within the first few weeks of business. Quickly following, in May, a second franchise location was opened in Kansas City to kick-off a summer of more expansion. In June, the brand welcomed a multi-unit franchise deal in Las Vegas, with the first location confirmed on Las Vegas Boulevard! Shortly following, in August, Big Whiskey’s eagerly opened their sixth corporate store and very first free-standing location in Republic, MO, expanding their existing footprint in the Midwest. A new campaign, “Game On” was launched in September to ring in football

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season. The updated branding and campaign goals set the tone for expanded seasonal marketing blitzes. It proved to be a huge success and provided an extra boost to existing sales growth ahead of the holiday season. Franchise expansion continued this Fall with another two-store deal signed for Birmingham, AL, in September. The first Alabama and Las Vegas locations are expected to open in late 2018. “The continued support of our loyal customers, and eagerness of new customers to welcome our brand is invaluable to us,” states company President, Austin Herschend. As Big Whiskey’s celebrated exciting new opportunities and sales growth, many Americans were experiencing tragedy when hurricane season hit. The company has always held a commitment to partnering with community organizations, and quickly reached out to Springfieldbased Convoy of Hope, to help hurricane victims. Following a month of fundraising

efforts in the aftermath of hurricanes Harvey and Irma, the brand raised $10,000 for the national disaster relief organization, Convoy of Hope, and their continued relief efforts. Throughout 2017, Big Whiskey’s has contributed over $30,000 to various community organizations and causes. In a casual dining market that has struggled this past year, Big Whiskey’s American Restaurant & Bar continues to trend up month over month. With multiple store openings set for 2018, that trend is expected to continue. Big Whiskey’s also aims to expand their charitable partnerships in 2018 and continue to support a variety of community causes, both in cities they serve and beyond. Big Whiskey’s supports and welcomes veteran franchisees into the Big Whiskey’s franchise system. To learn more about becoming part of the Big Whiskey’s family and available franchising opportunities, please email franchise@ bigwhiskeys.com. bigwhiskeysfranchise.com

Goal-shattering $1.25 million donated by Sport Clips Haircuts to VFW for Help A Hero Scholarships Sport Clips Haircuts recently donated $1.25 million to the Veterans of Foreign Wars of the U.S. Foundation to support active-duty U.S. service members’ and veterans’ scholarships through the Help A Hero program. This year’s fundraising target was shattered when Sport Clips’ clients and product partner donations exceeded the original $1 million goal, and Sport Clips made its own Veterans Day contributions of $1 per haircut service. Help A Hero began as an initiative between Sport Clips and the VFW to provide phone calls home for deployed and hospitalized service members and veterans. The initiative then transitioned in 2013 to the VFW’s “Sport Clips Help A

Hero Scholarship” program. To date, more than 900 VFW-administered scholarships have been awarded to qualified, activeduty military and veterans who wish to pursue college degrees and vocational certifications. “It’s exciting to see these service members and veterans using Help A Hero scholarships, getting additional training and education, and launching successful, productive civilian careers. Many have used this scholarship to complete their education and are already reaching their personal and professional goals,” says Sport Clips Founder and CEO Gordon Logan, a U.S. Air Force veteran and Life member of the VFW. “Saying ‘thank you’ in this way to our very-deserving military takes the hard work of team members

and our generous, supportive clients and product partners. We’re grateful and humbled in making this donation.” ”The impressive level of support shown by Sport Clips owners, stylists, clients and product partners sets an inspiring precedent,” said VFW National Commander Keith E. Harman. “Help A Hero scholarships provide our service members, veterans and their families with vital financial support and stability, and we’re thankful for this record-breaking donation which ensures that we can continue to provide the high level of support our warriors deserve.” As a part of this year’s fundraising efforts, Sport Clips partners John Paul Mitchell Systems, American Crew, Nioxin, Sexy Hair and Gibs Grooming donated to the Help A Hero program. Sport Clips is the Official Haircutter of the VFW, and its Help A Hero campaign is just one of the many ways it supports active-duty military and veterans. To find out more, visit your local Sport Clips or SportClips.com.

About The Veterans of Foreign Wars The Veterans of Foreign Wars of the U.S. is the nation’s largest and oldest major war veterans organization. Founded in 1899 and chartered by Congress in 1936, the VFW is comprised entirely of eligible veterans and military service members from the active, Guard and Reserve forces. With nearly 1.7 million VFW and Auxiliary members located in nearly 6,400 Posts worldwide, the nonprofit veterans service organization is proud to proclaim “NO ONE DOES MORE FOR VETERANS” than the VFW, which is dedicated to veterans’ service, legislative advocacy, and military and community service programs. For more information or to join, visit our website at www.vfw.org.

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what’s new! Image One Facility Solutions Celebrates 100th Franchise Owner Milestone Expanding Commercial Cleaning Brand Joins Elite Club of Franchises Image One Facility Solutions, a top commercial cleaning franchise recognized for owner satisfaction and affordability, continues its ascent as a service industry franchise. Image One is announcing it has reached a symbolic milestone in the world of franchising — there are now more than 100 franchise owner-operators in its system. “Stepping back to soak in what we have accomplished as a maturing franchise, I am so proud of what our team and franchise owners have been able to do to expand our model and create a trusted commercial cleaning brand,” said Image One President and Co-Founder Tim Conn. “This milestone underscores the impact our corporate support team has on leading and guiding existing franchise owners and inviting qualified candidates who are committed to building their own business to join us as a fellow owner.” Image One USA is actively seeking qualified military veterans to become franchise affiliates with the growing franchise. And now, with actively partnering with VeteransOpportunities.com, a growing online veteran community, Image One USA is on the fast track to welcoming qualified military veterans to its system. “We’re absolutely thrilled to be actively recruiting qualified military veterans to join our system as independent business owners,” said Tim Conn, co-founder and director of operations for Image One USA. “This is the kind of business model that allows people who bring a mission-oriented, positive attitude to the table to really thrive. Our franchise affiliate model will provide veterans all the necessary training and ongoing support to

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fully own and operate an Image One franchise in their respective communities.” Recently rated one of the top emerging franchise systems by Franchise Business Review and one of the most valuable franchise opportunities currently on the market, Image One USA provides military veterans the ability to own and operate a recurringrevenue business at a fraction of the cost of some other franchise models. The company also extends an attractive startup option that allows franchise owners to finance more than half of the franchise fee, opening the door to ambitious veterans with limited capital. “This is a fantastic investment and business model for military veterans looking for the right business fit for them,” said Matthew Amici, president of VeteransOpportunities.com. “Businesses like Image One USA are creating unprecedented opportunities for veterans to realize their full professional potential and create lasting legacies for their families through business ownership.” For more information, please visit www.imageoneusa.com/ franchise/franchise-spotlight/military-veterans

The public and policymakers need to understand franchising. Our purpose

@OurFranchise is an industry-wide campaign created to spread the word about the value of franchising and share the stories of men and women just like you, who are leading the way as franchisors, franchisees, and franchise employees. The franchise business model has been proven time and time again to work, but it’s threatened when the public and politicians don’t understand how it operates to beneﬁt local, independent franchise establishment owners and their communities. Putting a spotlight on real leaders succeeding with the franchise model is how we’ll ensure franchising is stronger than ever before.

Share the tools and resources offered on AtOurFranchise.org/resources

Help us keep the momentum going

Since our launch in June 2016, we’ve reached 1.7 million people through outreach efforts, including events in key cities and states, where we spoke directly with business owners, employees, policymakers, and the media. Additionally, we’ve reached people across America through our website and social media channels, digital advertisements, and the promotion of We the Franchisees on Politico – but there is much more work to do. As a franchisor, franchisee, or franchise vendor, you are a leader in your community – and we need your support, now more than ever.

You beneﬁt by joining

By joining @OurFranchise, you’ll get access to exclusive stories and resources that can help grow your franchise business, educate employees at all levels about the franchise business model, and share the economic importance of franchising with consumers. You will also have the opportunity to share your franchise success story with your peers. Visit AtOurFranchise.org Contact Erica Farage, Senior Director of Political Affairs and Grassroots Advocacy and Multi-Unit Franchisee Engagement International Franchise Association efarage@franchise.org (202) 662-0760

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This is just the beginning

Make sure you stay up to date with the campaign’s latest efforts through email updates and social media. Visit our website to read and share the latest stories of franchisors and franchisees making an impact in their communities. Become a franchise advocate to help ensure Americans, now and in the future, have the opportunity to start franchise businesses. Take the lead today!

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profile: Jared Toppenberg, AdvantaClean

Jared Toppenberg

Profile

Vets in Franchising:

“Rewards Follow the Work!” Jared Toppenberg knows what it’s like to be a live target. He routinely hovered his Army combat chopper a couple of hundred feet off the ground, supporting troops in Iraq and Afghanistan during intense fighting. Many times, the enemy trained their weapons on him, hoping to take him out. “The bullets would come so close, you could actually hear them “snap” as they whipped by the canopy at supersonic speed,” said Toppenberg. “You don’t really think about getting hit because you’re too focused on protecting the guys on the ground.”

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These days, Toppenberg’s work is just a bit less risky, but still very rewarding. He has owned an AdvantaClean franchise near Tacoma, Washington since 2014. AdvantaClean is the nation’s fastest growing light environmental service™ franchise business. Like many vets returning to civilian life, he wasn’t sure exactly what he wanted to do, but he did know he wanted to be the “top dog” of an operation. “In the military, each person has a specific

“I can’t think of anything more rewarding and satisfying than building something you can be proud of, watching it grow, and fulfilling the vision you had for it. Rewards follow the work, not the other way around.” “If I had tried to do all of the research and vetting on my own, I might still be doing that, today,” laughed Toppenberg. “It’s an extensive, time consuming job. Having a TES coach made all the difference in the world. AdvantaClean has been just what I was looking for to help me reach my goals of Income, Lifestyle, Wealth, and Equity. They specialize in mold remediation, moisture control, and emergency water removal, among other applications. I had a background in my family’s plumbing business, so this was an easy segue.”

task, and you mold a team around people with those tasks to complete successful missions. But each team must have a leader who is focused, precise, detailed, and can help his crew capture the vision of the mission from start to finish. My time in the Guard gave me the confidence to be that kind of leader. I just needed to find a conduit for it.” Jared knew a 9-5, “between the lines” job was not for him. He wanted to do his own thing, but not start anything from scratch. He started heavily researching franchise businesses. He attended a seminar conducted by a Navy vet who is an alternative career coach with The Entrepreneur’s Source®, North America’s leading career transition coaching franchise. The TES rep offered guidance and resources to help find just the right franchise fit for Toppenberg. In the end, he chose AdvantaClean.

“AdvantaClean has a history of seeking out veterans to become franchise owners,” said Jeff Dudan, CEO/Founder of AdvantaClean. “With Jared, we knew we would be getting a guy who was used to following a system, could multi-task, adapt, and still deliver a positive outcome for the client, no matter the challenge. He was our “Rookie of the Year” in 2014, exceeding his first-year revenue goals. We believe he will be a top performer within our company for years to come.” One of the reasons Jared chose a franchise business, over starting one on his own was simple. He could be in business FOR himself, but not BY himself. AdvantaClean’s proven systems and successful strategies gave him even greater confidence from the jump. It also offers on-going, comprehensive training and support for him and his team, creating another platform for success. Plus, Toppenberg has reached out to network with other franchise owners, developing friendships and connections, just like when he was a chopper pilot in the Guard. He knows he can bounce ideas off of them, and get answers to questions on everything from complex jobs to filling out paperwork correctly. However, just because a franchise has a great brand, and

a positive, proven track record, doesn’t mean one can sit back, and just let the business and money-roll in. “My team and I know we have to prove ourselves worthy of our client’s trust every day,” said Toppenberg. “Any vet who is thinking about franchising as a business opportunity must know this: you will work harder than you have ever worked before. But it’s worth it, because it’s YOUR business. I can’t think of anything more rewarding and satisfying than building something you can be proud of, watching it grow, and fulfilling the vision you had for it. Rewards follow the work, not the other way around.” Asked about any surprises in his transition from military life to successful civilian business owner, Toppenberg smiled. “The military, as you know, has a very no-nonsense way of doing things which I had gotten use to after almost 19 years of service,” according to Jared. “Their thinking is: ‘Here’s your mission. You’ve trained for it. Go do it. No excuses!’” “In my job now, I have had to become more aware of people’s feelings, making sure I approach them the right way, especially when it comes to motivation. The military doesn’t train very well for that!” Jared Toppenberg is the owner of AdvantaClean-South Sound serving Tacoma, and other nearby communities. He has been with AdvantaClean since 2014, and captured the company’s “Rookie of the Year” honors for exceeding corporate revenue goals that year. Toppenburg is a 19-year National Guard veteran. While on active duty, he served as a combat helicopter pilot in Iraq and Afghanistan, providing close support for ground troops, as well as flying reconnaissance missions into enemy territory. He has also provided his professional flying skills to local, state, and federal law enforcement drug task force agencies. www.advantaclean.com

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have your say: Scott Quagliata, Marco’s Pizza

How My Military Background guided my Success in the Franchise Industry

After leaving my 20year career in the army to work for a technical professional services firm, I never would have expected to see myself as franchisee or the Vice President of Veterans’ Programs and Recruiting for Marco’s Pizza. I saw several of my military peers transition into franchising after retiring from the military and I quickly learned why franchising is a natural fit for veterans. Franchises provide structure and clear, proven systems to follow. One day, I was speaking with Joe Walker, a friend from the Army who at the time owned 14 Marco’s Pizza franchise locations. After a few conversations, he offered to assist me in opening my own location. A few months later I went to Discovery Day, where I learned more about the

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“Utilizing the benefits that come with being a part of the military is key to becoming a successful franchisee.” franchise opportunity, and had the pleasure of talking to the President of the brand. We discussed how the franchise wanted to do more for Veterans and he offered me the newly created position of Vice President of Veterans’ Programs and Recruiting on the spot, which meant I would recruit and assist with onboarding newly transitioned Soldiers into the franchise. Accepting the role was best decision I made, as it has provided me with a platform to help Veterans transition back into civilian life in a meaningful and impactful way. My own transition from the military was successful for a variety of reasons, including many that others can and should take advantage of. These include:

Utilizing Your Veteran Support System If I didn’t network with other veterans, I wouldn’t be where I am today. I wouldn’t have gone to Discovery Day, I wouldn’t have had the opportunity to speak to Marco’s President and I wouldn’t be helping other Veterans transition into civilian life through franchising. Seeking career opportunities post-service can be an extremely daunting task, so seeing where fellow Veterans are finding success is key to getting started on the right foot. Veterans looking to franchise should use the networks that they have; talk to other Veteran franchisees who are doing well and traveling down the same path as you. Developing and maintaining those relationships are important because at the end of the day, everyone wants to see each other succeed as you would have in the military.

Tapping Your Leadership Experience Being part of the military, you need to have an inherent work ethic. Those with a strong, natural work ethic come to learn why this skill is a necessity – there’s often a sense of urgency to complete tasks.

Failure to do so in a quick and efficient manner can have severe consequences. This carries over to owning a franchise as well. You learn how to prioritize what is required of being a franchisee and to take care of the tasks at hand quickly and efficiently, as your team, employees and livelihood depend on your responsibility. There are several parallels between being in the military and owning a franchise. You want to get your employees to work toward a common goal as you would in the military. Leading a store team is similar to leading a platoon – both are about the size of 30 people. The mentoring skills you used in the military are required to build a successful and hard-working team. Just as the military is, owning a franchise is a people business. If you don’t understand or are unable to influence people, it’s highly unlikely that you will be able to succeed. You must understand the needs of your teammates, customer and vendors. Failure to do so limits your chances at success.

Putting Trust in the Business Model No one is an expert in everything. Far too often business owners try to be the jack of all trades, which hurts the business more than it helps. A business is specialized just as the Army is. You probably won’t find an intel sergeant in charge of firing a howitzer any more than finding someone who hasn’t studied accounting wouldn’t be completing tasks that an accountant would. Find the right people to complete the tasks that you wouldn’t be able to accomplish properly on your own. People specialize in different areas for a reason - let go of the need to control every aspect of the business and delegate tasks to someone who can do the job and do it well. A lot of pressure comes with being a business owner, but asking for help and having established support systems backing you can alleviate some of that stress. This is why franchises are an ideal fit for veteran entrepreneurs –

Scott Quagliata

“Continue fostering those relationships with the people you’ve served with, continue putting the skills you developed in the military to use and most of all, trust the business model.” each franchise has built-in operational standards for you to follow. Utilizing the benefits that come with being a part of the military is key to becoming a successful franchisee. Continue fostering those relationships with the people you’ve served with, continue putting the skills you developed in the military to use and most of all, trust the business model. Veterans who follow these pieces of advice will be better postured to succeed as franchisees. Scott Quagliata was commissioned out of ROTC after graduating from Washington and Lee University in 1989 and served until he retired in 2009. After years in a corporate setting, Scott purchased a Marco’s Pizza in Charlottesville and became the Vice President of Veterans’ Programs and Recruiting. marcosfranchising.com

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H AVE YOU R SAY

Paul Bosley, Managing Member, Business Finance Depot

Franchise Financing Available in Today’s Market Today’s franchises come in all sizes with a wide variety of franchise equipment. Consequently, the appropriate financing for the diverse franchises varies considerably based upon the amount of capital required. This article offers an overview of the best financing available based upon the amount of money required to properly capitalize any given franchise.

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Financing a Franchise for $350,000 or Less In 2014, the Small Business Administration (SBA) introduced the Small Loan Advantage loan program some lenders refer to as the SBA Express loan. After the “The Great Recession”, many homeowners lost their real estate equity which is used as collateral requirement for a SBA 7(a) loan approval in most cases. Consequently, many perspective borrowers were unable to secure financing because they lack the equity in their home required to collateralize their loan request. The SBA Express loan is capped at $150,000 to limit the lender’s risk since the borrower’s real estate collateral is not required and business assets are used to collateralize

the SBA Express loan. Since the collateral used to secure an equipment lease is the equipment being financed and the collateral for the SBA Express loan is the equipment needed to operate the business, these two debt financing products are compatible!

Capital Leases – Leasing Equipment to Own The most common financing option for the equipment needed to operate any franchise is a capital lease. The main purpose of a capital lease is to finance the equipment purchase while preserving the owner’s working capital. Franchisees can finance the purchase of their proprietary equipment, security systems, computer

“The best part about this financing combination of a SBA Express loan & equipment lease is that the collateral is your business assets … not your home … just your business assets!” hardware & software, flooring, outdoor signage and other tangible items needed to run the business using an equipment lease. The owner(s) are required to personally guarantee equipment lease. The required down payment ranges from a lease payment up to 20% of the amount financed. Lease documentation fees may range from $95 to $495. Repayment terms typically range from 12 months up to 60 months. All payments are tax deductible, so these payments will lower business’s taxable income and, in turn, tax liability. Since the plan is to keep their equipment long term, a typical capital lease offers a $1.00 end of term purchase option.

Small Business Administration (SBA) Express Working Capital Loan This government backed loan is designed to provide up to $150,000 of working capital to support the company until the business generates positive cash flow. The loan process 90 days to complete before the loan is funded. The SBA Express loan approval requirements are good personal credit & some liquid assets and the loan process requires attention to detail. If the use of the loan funds is to finance a new location, the loan can be approved in advance, however the funds will not be distributed by the bank until the new location has received a certificate of occupancy. This insures that the money will be used to operate the new business & will not be used to pay for build out expenses. The interest rate for this loan is calculated by starting with the prime rate as published in the Wall Street Journal which is currently 4.5%. The bank charges a 2.75% risk premium on this loan so the interest rate is 7.25% now. The repayment term is 10 years and there is no pre-payment penalty so if the franchisee is extremely profitable, the loan can be prepaid to save interest expense.

In conclusion, equipment leases and SBA Express loans are complementary products that will enable the owner of a franchise with good personal credit to finance the opening and expansion of a franchise. The best part about this financing combination of a SBA Express loan & equipment lease is that the collateral is your business assets… not your home … just your business assets!

Financing a Franchise for $350,000 or More The SBA 7(a) Loan will provide financing ranging from 70% to 90% of the total project costs which typically includes the equipment needed to purchase the franchise rights, organization costs, location buildout, deposits, inventory & operating working capital. The owners’ equity injection ranges from 10% to 30% of the total project costs and cannot be borrowed money such as a home equity loan. The borrowers must provide their resume(s) demonstrating industry experience, transferable management skills and/or related education. The collateral for the loan includes all business assets. Addition collateral is often required which is typically residential real estate only up to the loan $ amount. Good personal credit is required. The loan repayment term is 10 years. Prepayment penalties typically range from 1-4% over the initial term period. The interest rate is typically prime rate as published in the Wall Street Journal (4.5%) plus a risk premium typically 2.75% so the current rate offered is 7.25%. Closing Costs are approximately 3% of loan amount and are usually added to the loan amount.

Real Estate Acquisition The SBA loan will finance up to 90% of the real estate acquisition cost. The owners’ equity injections are typically

Paul Bosley

10% of the acquisition cost of the real estate and cannot be borrowed money such as a home equity loan. The business must occupy at least 50% of the useable space which provides an opportunity to lease out up to 49% of the useable space. The collateral is real estate being purchased. Good personal credit is required. The loan repayment term ranges from 20 to 25 years and is fully amortized with no balloon payment. The interest rate is calculated starting with the prime rate (4.5%) plus a risk premium which will vary based up the appraisal and the strength of the borrower. The closing cost is typically 3% of loan amount added to the amount financed at closing. The timing to close is 90 days and varies with bank work load, time for real estate appraisal & borrower responsiveness.

Conclusion There are many benefits of the SBA 7(a) program to finance a new or expanding franchise business. The business owner will have only one monthly debt payment amortized over the longest repayment term available with no significant prepayment penalty. The use of funds is nearly unlimited to any legitimate business purpose. Since the SBA 7(a) loan is backed by the federal government, it offers the lowest APR available. Consequently, we recommend you strongly consider this form of financing for the wide variety of uses that this flexible loan product offers for business financing. Paul Bosley is a Managing Member of the Business Finance Depot. www.businessfinancedepot.com

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