For many aspiring franchise owners, securing financing can feel like one of the most intimidating parts of the business ownership journey. But according to Samantha Martin, Senior Business Development Officer at Huntington Bank, some franchise systems make that process significantly easier than others.
During a recent “Meet the Franchise” webinar hosted by 1851 Franchise Publisher Nick Powills, Martin shared an insider's perspective on what banks evaluate when financing franchise opportunities and why Children's Lighthouse continues to stand out as one of the most attractive brands in the early education sector.
As the leader of Huntington Bank's education services lending division, Martin specializes in financing childcare and preschool franchise concepts. Throughout the conversation, she emphasized that lenders are looking for more than just qualified borrowers. They are looking for business models with predictable cash flow, proven operating systems, and a track record of success.
“This industry is very attractive because it's needs-based and non-discretionary,” Martin said. “Families need childcare regardless of what the economy is doing, and they're willing to spend money on quality care. It's also a recurring revenue business. Ideally, you enroll a family's first child as an infant, they move through the program, graduate from pre-K, and then younger siblings follow. You can have a family with you for seven or eight years.”
According to Martin, the childcare industry continues to attract lender interest because of its resilience and long-term demand.
“That creates predictable cash flow,” Martin said. “You're billing weekly, biweekly, or monthly, and most children stay enrolled for a long period of time. Unlike a restaurant, where customers choose whether to come in on a given day, this revenue is ongoing and highly predictable.”
Demand also remains strong across many markets, particularly for younger age groups where capacity is often limited.
“You'll often find all the major childcare franchises operating alongside independent centers, and there's still unmet demand,” Martin said. “Parents are constantly trying to find childcare openings, especially for infants.”
While financial qualifications are important, Martin explained that lenders evaluate prospective franchisees on far more than liquidity and credit scores. The strongest candidates combine financial stability with leadership experience, work ethic, and a genuine commitment to the business.
"Do they have the grit and the work ethic to be able to start a preschool?" Martin said. "It is a lot of hard work in the beginning. I'm thinking about them not only as a business person, but as a communicator and how other people are going to perceive them. Does their personality lend to talking to parents that may be upset? Do they have that welcoming, empathetic personality?"
According to Martin, operator quality is often the determining factor between success and failure. "When schools fail, it's almost always related to the operator. It's usually absentee ownership, lack of involvement, not putting the right people in place or simply not having the drive and commitment required to make the business successful.”
Martin highlighted several key indicators that banks review when evaluating franchise systems, including the brand's FUND score, unit success rate, and long-term revenue growth.
“One of the primary tools lenders rely on is a FUND report, which provides a FUND score,” Martin said. “Across franchising, education brands tend to perform very well, and Children's Lighthouse is no exception. Their FUND score is 805 out of 950, which is extremely strong. They also have a very high unit success rate. Over the last eight years, their unit success rate is 97.3%, and over the last five years, it's 100%.”
Equally important is the brand's revenue growth trajectory. "In addition, their unit revenues have grown significantly,” Martin said. “Since 2021, average revenues have increased from approximately $1.1 million per location to more than $2 million per location. When you combine strong revenue growth, expanding unit counts and outstanding operating performance, it paints a very positive picture for lenders. The financials look strong. The brand is growing. Very few locations are closing. They're expanding into attractive markets. All of those factors make Children's Lighthouse a very attractive franchise system for lenders.”
Beyond the numbers, Martin emphasized that franchise support plays a critical role in helping lenders feel comfortable financing new locations.
Most franchisees entering the childcare industry are not experts in licensing requirements, facility development, staffing, or curriculum implementation. Children's Lighthouse provides guidance throughout each of those areas.
“Most lenders are looking to the franchisor to provide support throughout the process,” Martin said. “That includes training, facility design, operational guidance, and helping franchisees understand state licensing requirements.”
Ultimately, Martin believes Children's Lighthouse franchisees benefit from a financing advantage because the brand has already demonstrated what lenders want to see: strong unit economics, consistent growth, low closure rates, and a proven operating model.
"Yes, it is," Martin said when asked whether Children's Lighthouse franchisees have a simpler path to funding. “The biggest reason is the data. When you're financing a new location, you want confidence that the business model works. With Children's Lighthouse, we can see that it has worked repeatedly. We have years of performance data that demonstrate success.”
That proven track record, Martin said, gives lenders more confidence in the brand's ability to support new owners and continue expanding successfully. "It's a great business to be in," she said. “Banks want to lend to premium franchise systems like Children's Lighthouse because the performance data supports it.”
A transcript of Martin’s interview with Powills appears below. It has been edited for brevity, clarity, and style.
Nick Powills: Samantha, thanks for joining us. We're going to talk about lending today, which I'm very excited about. One thing I noticed is that Huntington recently launched a new division that you're leading. Tell us about that.
Samantha Martin: Yes. I joined Huntington about a year ago to help launch an Education Services Lending Division within our SBA department.
Huntington, like several other banks, recognized that education lending, especially franchise preschool lending, is a very attractive industry. I had spent about five years financing education franchises before joining Huntington, so I came on board last August to help build out that vertical.
Powills: Every time I've been asked what industries I believe are the most stable, education is always near the top of my list. Why do you think education continues to be such a strong sector for franchise growth?
Martin: This industry is very attractive because it's needs-based and non-discretionary. Families need childcare regardless of what the economy is doing, and they're willing to spend money on quality care.
It's also a recurring revenue business. Ideally, you enroll a family's first child as an infant, they move through the program, graduate from pre-K, and then younger siblings follow. You can have a family with you for seven or eight years.
That creates predictable cash flow. You're billing weekly, biweekly, or monthly, and most children stay enrolled for a long period of time. Unlike a restaurant, where customers choose whether to come in on a given day, this revenue is ongoing and highly predictable.
Powills: If I take the word "education" out of that answer, what you described is simply a great business model. Stability, consistency, scalability and predictable revenue. Do you think many first-time franchise buyers overlook childcare because they don't fully understand the business fundamentals?
Martin: I think there are a couple reasons.
First, childcare can seem intimidating. There's liability, government oversight, staffing requirements and what people perceive as high operating costs. It can be a complex business to run.
Second, most people interact with restaurants every day, but many don't really understand childcare until they become parents. Once you have children and start paying for childcare, you realize just how important it is and how much demand exists.
At that point, many people begin to see that it's actually a very strong business opportunity.
Powills: One thing I notice is that many markets still seem underserved. There can be multiple competitors operating successfully and still not enough supply to meet demand. Do you see that as well?
Martin: Absolutely, especially in larger markets. You'll often find all the major childcare franchises operating alongside independent centers, and there's still unmet demand. Parents are constantly trying to find childcare openings, especially for infants.
Infant care is often the hardest category to access because there are fewer available spots due to lower teacher-to-child ratios. Many infant openings are already spoken for by families who have older children enrolled. As a result, demand continues to outpace supply, particularly among younger age groups.
Powills: Let's shift to financing. Let's say I'm a prospective franchisee and I've decided this is the industry I want to enter. What should I expect from a financing standpoint? How much cash do I need, and how does the process generally work?
Martin: Every franchise has its own liquidity requirements, and once you narrow down a brand, they'll help outline those expectations. The amount of cash you'll need depends largely on the type of project.
At the higher end, if you're building a facility from the ground up, you may need around $1 million in equity injection and post-closing liquidity. Banks want to see that you have funds available both for the project and for stability after closing.
At the lower end, some brands offer build-to-suit opportunities where a developer constructs the school and you lease the facility. In that case, you're primarily responsible for franchise fees, equipment and working capital. Those projects are typically around $1 million total.
With SBA financing, borrowers generally contribute between 10% and 15% of the total project cost, depending on the loan structure.
Powills: Can working capital be financed, or does that need to come from my own cash reserves?
Martin: It can absolutely be financed. With SBA lending, the total project cost includes everything necessary to get the business open and ramped up to profitability. Working capital is actually a significant portion of that.
For a new school, working capital is often between $450,000 and $500,000. That's designed to support operations until the school reaches break-even, which typically occurs between months eight and 12.
Powills: Is there a lender preference between owning the real estate and leasing a build-to-suit facility?
Martin: Not really. The loan structure changes depending on the model, but neither is inherently better. It's largely dependent on the market, the franchisee's goals and what opportunities are available.
In some markets, owning the real estate simply isn't practical. In others, it makes perfect sense. Banks certainly like real estate collateral, but that's not the primary factor. We're underwriting based on projections, cash flow and the borrower's ability to service the debt.
Powills: From a borrower's standpoint, is approval based entirely on the financials, or does personality play a role in how much confidence a lender has?
Martin: Personality absolutely matters. Obviously, having the financial resources to complete the deal is important. It's also helpful when there's additional household income supporting the family during the startup phase. For example, it often works well when one spouse is launching the business while the other continues working.
But beyond the numbers, I'm evaluating the person. I want to understand why they want to get into education, what motivates them and what experiences they've had that will help them succeed.
A lot of that comes down to conversation. Do they have the grit and work ethic necessary to start a preschool? Because it is a tremendous amount of work in the beginning. You'll be doing things very different from what you're used to in a corporate environment. You're working with families, children and staff. It's a much more personal business.
Powills: So what I'm hearing is that your drive and desire can influence whether you're approved for a loan.
Martin: Absolutely. When you look at the top education franchises, they have very low failure rates. When schools fail, it's almost always related to the operator. It's usually absentee ownership, lack of involvement, not putting the right people in place or simply not having the drive and commitment required to make the business successful.
Powills: In all your years doing this, are there certain qualities that immediately make you say yes or no?
Martin: Definitely. Sometimes you talk to people and they don't have a strong work history. Their reasoning for wanting to buy the business is simply, "I've heard these make a lot of money." For me, that's a red flag.
I'm trying to determine whether this person is a hard worker. Do I think they're a good person? Do they have the personality to work with parents who may be upset? Do they come across as welcoming and empathetic? Because that's a huge part of being an owner.
I'm evaluating them not just as a businessperson, but as a communicator and as someone who will represent the business in their community.
Powills: It sounds similar to how a franchisor evaluates franchise candidates. You're motivated to find the right people because if they're successful, they'll come back and finance a second, third or fourth location with you.
Martin: Exactly. The lender takes the most risk on the first school. But if that franchisee succeeds, they're likely going to return for future locations. That's what lenders hope for. We want to help people build successful businesses and continue growing alongside them.
Powills: Walk me through the process. Do I get approved by the franchisor first and then pursue financing, or do I talk to the bank first?
Martin: Generally, you start with the franchisor. Most franchise systems have a screening process that includes a financial review, a credit review and interviews. Many also have a Discovery Day or other evaluation process.
Once you pass that stage, the franchisor helps identify a location, a development opportunity or an acquisition candidate. They begin building out the project costs and putting the deal structure together.
By the time the opportunity reaches a lender, much of that work has already been completed. Most of my deals are referred directly by franchisors. Occasionally, I'll work with a prospective franchisee earlier in the process, especially if they're exploring multiple sites or looking at an acquisition. But typically the franchise system introduces us.
Powills: There's another important takeaway here. If a lender like you is working closely with a franchisor, that's another signal to prospective franchisees. You're only going to work with brands you believe have a strong chance of success.
Martin: Correct. We rely heavily on franchisors throughout the underwriting process. We're leaning on their vetting of franchise candidates. We're leaning on their site selection process. We're relying on the market studies and reports they've completed.
When we're discussing opportunities with our credit teams, we're looking at whether we trust the franchisor's process and whether they've demonstrated success over time. We're looking for franchisors with strong performance metrics, strong scores and proven track records. Those are the systems that lenders feel most comfortable supporting.
Powills: That's fascinating because many franchise buyers spend so much time reviewing marketing materials and Item 19s, but what you're talking about is deeper due diligence. You're looking at closures. You're looking at long-term success rates. You're evaluating how the franchisor screens franchisees. You're looking at how they support operators after they open. Those are the things that really determine whether a business succeeds.
Martin: Exactly. I talk to a lot of people before they even sign their franchise agreement. Many franchisors encourage those conversations because they want candidates to understand the financing process early.
I enjoy those conversations because it allows me to share what I've learned and help people understand what they're getting into. Many franchise systems also have former bankers or financing specialists on staff who help candidates review financial statements, answer financing questions and prepare for the lending process. Getting involved early gives everyone a better chance of success.
Powills: Let's talk specifically about Children's Lighthouse. What stands out to you about the brand from a lender's perspective?
Martin: If we're looking purely at the data, Children's Lighthouse performs exceptionally well.
One of the primary tools lenders rely on is a FUND report, which provides a FUND score. Across franchising, education brands tend to perform very well, and Children's Lighthouse is no exception. Their FUND score is 805 out of 950, which is extremely strong. They also have a very high unit success rate. Over the last eight years, their unit success rate is 97.3%, and over the last five years, it's 100%.
In addition, their unit revenues have grown significantly. Since 2021, average revenues have increased from approximately $1.1 million per location to more than $2 million per location. When you combine strong revenue growth, expanding unit counts and outstanding operating performance, it paints a very positive picture for lenders. The financials look strong. The brand is growing. Very few locations are closing. They're expanding into attractive markets. All of those factors make Children's Lighthouse a very attractive franchise system for lenders.
Powills: The title of this webinar is "Why Children's Lighthouse Franchisees Have an Easier Path to Funding." Is that actually true?
Martin: Yes, it is. The biggest reason is the data. When you're financing a new location, you want confidence that the business model works. With Children's Lighthouse, we can see that it has worked repeatedly.
Out of roughly 90 locations, none have closed over the last five years. That gives lenders confidence because we're looking at a business model that has been tested and proven over and over again. It's repeatable and repeatedly successful. That makes lending decisions easier because we aren't making assumptions. We have years of performance data that demonstrate success.
Powills: So it isn't just the concept itself. It's the franchisor and the support system behind it.
Martin: Exactly. Most lenders are looking to the franchisor to provide support throughout the process. That includes training, facility design, operational guidance, and helping franchisees understand state licensing requirements.
If someone were trying to build a preschool on their own without that support, there would be a tremendous amount to learn. The franchise system has already built those processes. They've done it before. They know what works. That support reduces risk and increases the likelihood of success.
Powills: One thing I've found fascinating during this conversation is how much of the due diligence process happens through lenders.
I've been in franchising for more than 20 years, and franchise buyers often rely on brokers, portals, and marketing materials. But the information you're sharing goes much deeper. You're looking at unit closures. You're looking at long-term success rates. You're evaluating the franchisor's leadership and systems. If I were buying a franchise, I would want to hear what you're saying because it tells me whether I've chosen the right brand.
Martin: And I do have those conversations with people. Many of the franchise systems I work with encourage prospective franchisees to speak with me before they sign an agreement. I enjoy those conversations because I can share information about financing and help people better understand the process.
Many franchisors also have financing specialists or former bankers on staff who assist candidates with questions about lending, liquidity requirements and preparing for financing. Those conversations on the front end can be extremely valuable. The earlier we can get involved and understand the prospective franchisee, the more effectively we can help guide them through the process.
Powills: Before we wrap up, what final thoughts would you leave people with about education franchising?
Martin: I remain very bullish on this industry. It's a great business to be in. It allows people to own a business while still maintaining a family-oriented lifestyle. In many ways, it gives owners the opportunity to build something meaningful while still having nights and weekends with their families.
It's also rewarding because you're providing an important service to your community. You can step back and feel good about the impact you're making. From both a financial and banking perspective, the model simply makes sense.
Banks want to lend to premium franchise systems like Children's Lighthouse because the performance data supports it. There are plenty of lenders available, but it's important to work with one that understands the childcare industry and has experience financing these types of businesses.
At the end of the day, getting the absolute lowest interest rate isn't always the most important thing. Getting your loan closed and getting your school open is what matters most.
For anyone considering entering the childcare business for the first time — or looking to expand existing operations — I would be happy to have that conversation. I love talking about businesses, and I especially love talking about childcare.
Powills: Is "future franchisee" eventually going to be part of your title?
Martin: Maybe. When you spend enough time looking behind the curtain and seeing how these businesses operate, it's hard not to appreciate the opportunity.
Powills: That's something I keep hearing. People who get an inside look at this industry often end up wanting to participate themselves. For anyone focused on long-term wealth creation, especially if they own the real estate, this can be an incredible vehicle for building generational wealth.
Samantha, thank you for sharing your insights today.
Martin: Thank you. I really enjoyed it.
Powills: For Samantha Martin, I'm Nick Powills. Thanks for joining us for another episode of “Meet the Franchise.”
Watch the full webinar here.
Children's Lighthouse
SPONSORED
Children's Lighthouse's strong performance metrics, recurring revenue model and franchise support system make it a standout investment opportunity for lenders and franchisees alike.
For many aspiring franchise owners, securing financing can feel like one of the most intimidating parts of the business ownership journey. But according to Samantha Martin, Senior Business Development Officer at Huntington Bank, some franchise systems make that process significantly easier than others.
During a recent “Meet the Franchise” webinar hosted by 1851 Franchise Publisher Nick Powills, Martin shared an insider's perspective on what banks evaluate when financing franchise opportunities and why Children's Lighthouse continues to stand out as one of the most attractive brands in the early education sector.
As the leader of Huntington Bank's education services lending division, Martin specializes in financing childcare and preschool franchise concepts. Throughout the conversation, she emphasized that lenders are looking for more than just qualified borrowers. They are looking for business models with predictable cash flow, proven operating systems, and a track record of success.
“This industry is very attractive because it's needs-based and non-discretionary,” Martin said. “Families need childcare regardless of what the economy is doing, and they're willing to spend money on quality care. It's also a recurring revenue business. Ideally, you enroll a family's first child as an infant, they move through the program, graduate from pre-K, and then younger siblings follow. You can have a family with you for seven or eight years.”
According to Martin, the childcare industry continues to attract lender interest because of its resilience and long-term demand.
“That creates predictable cash flow,” Martin said. “You're billing weekly, biweekly, or monthly, and most children stay enrolled for a long period of time. Unlike a restaurant, where customers choose whether to come in on a given day, this revenue is ongoing and highly predictable.”
Demand also remains strong across many markets, particularly for younger age groups where capacity is often limited.
“You'll often find all the major childcare franchises operating alongside independent centers, and there's still unmet demand,” Martin said. “Parents are constantly trying to find childcare openings, especially for infants.”
While financial qualifications are important, Martin explained that lenders evaluate prospective franchisees on far more than liquidity and credit scores. The strongest candidates combine financial stability with leadership experience, work ethic, and a genuine commitment to the business.
"Do they have the grit and the work ethic to be able to start a preschool?" Martin said. "It is a lot of hard work in the beginning. I'm thinking about them not only as a business person, but as a communicator and how other people are going to perceive them. Does their personality lend to talking to parents that may be upset? Do they have that welcoming, empathetic personality?"
According to Martin, operator quality is often the determining factor between success and failure. "When schools fail, it's almost always related to the operator. It's usually absentee ownership, lack of involvement, not putting the right people in place or simply not having the drive and commitment required to make the business successful.”
Martin highlighted several key indicators that banks review when evaluating franchise systems, including the brand's FUND score, unit success rate, and long-term revenue growth.
“One of the primary tools lenders rely on is a FUND report, which provides a FUND score,” Martin said. “Across franchising, education brands tend to perform very well, and Children's Lighthouse is no exception. Their FUND score is 805 out of 950, which is extremely strong. They also have a very high unit success rate. Over the last eight years, their unit success rate is 97.3%, and over the last five years, it's 100%.”
Equally important is the brand's revenue growth trajectory. "In addition, their unit revenues have grown significantly,” Martin said. “Since 2021, average revenues have increased from approximately $1.1 million per location to more than $2 million per location. When you combine strong revenue growth, expanding unit counts and outstanding operating performance, it paints a very positive picture for lenders. The financials look strong. The brand is growing. Very few locations are closing. They're expanding into attractive markets. All of those factors make Children's Lighthouse a very attractive franchise system for lenders.”
Beyond the numbers, Martin emphasized that franchise support plays a critical role in helping lenders feel comfortable financing new locations.
Most franchisees entering the childcare industry are not experts in licensing requirements, facility development, staffing, or curriculum implementation. Children's Lighthouse provides guidance throughout each of those areas.
“Most lenders are looking to the franchisor to provide support throughout the process,” Martin said. “That includes training, facility design, operational guidance, and helping franchisees understand state licensing requirements.”
Ultimately, Martin believes Children's Lighthouse franchisees benefit from a financing advantage because the brand has already demonstrated what lenders want to see: strong unit economics, consistent growth, low closure rates, and a proven operating model.
"Yes, it is," Martin said when asked whether Children's Lighthouse franchisees have a simpler path to funding. “The biggest reason is the data. When you're financing a new location, you want confidence that the business model works. With Children's Lighthouse, we can see that it has worked repeatedly. We have years of performance data that demonstrate success.”
That proven track record, Martin said, gives lenders more confidence in the brand's ability to support new owners and continue expanding successfully. "It's a great business to be in," she said. “Banks want to lend to premium franchise systems like Children's Lighthouse because the performance data supports it.”
A transcript of Martin’s interview with Powills appears below. It has been edited for brevity, clarity, and style.
Nick Powills: Samantha, thanks for joining us. We're going to talk about lending today, which I'm very excited about. One thing I noticed is that Huntington recently launched a new division that you're leading. Tell us about that.
Samantha Martin: Yes. I joined Huntington about a year ago to help launch an Education Services Lending Division within our SBA department.
Huntington, like several other banks, recognized that education lending, especially franchise preschool lending, is a very attractive industry. I had spent about five years financing education franchises before joining Huntington, so I came on board last August to help build out that vertical.
Powills: Every time I've been asked what industries I believe are the most stable, education is always near the top of my list. Why do you think education continues to be such a strong sector for franchise growth?
Martin: This industry is very attractive because it's needs-based and non-discretionary. Families need childcare regardless of what the economy is doing, and they're willing to spend money on quality care.
It's also a recurring revenue business. Ideally, you enroll a family's first child as an infant, they move through the program, graduate from pre-K, and then younger siblings follow. You can have a family with you for seven or eight years.
That creates predictable cash flow. You're billing weekly, biweekly, or monthly, and most children stay enrolled for a long period of time. Unlike a restaurant, where customers choose whether to come in on a given day, this revenue is ongoing and highly predictable.
Powills: If I take the word "education" out of that answer, what you described is simply a great business model. Stability, consistency, scalability and predictable revenue. Do you think many first-time franchise buyers overlook childcare because they don't fully understand the business fundamentals?
Martin: I think there are a couple reasons.
First, childcare can seem intimidating. There's liability, government oversight, staffing requirements and what people perceive as high operating costs. It can be a complex business to run.
Second, most people interact with restaurants every day, but many don't really understand childcare until they become parents. Once you have children and start paying for childcare, you realize just how important it is and how much demand exists.
At that point, many people begin to see that it's actually a very strong business opportunity.
Powills: One thing I notice is that many markets still seem underserved. There can be multiple competitors operating successfully and still not enough supply to meet demand. Do you see that as well?
Martin: Absolutely, especially in larger markets. You'll often find all the major childcare franchises operating alongside independent centers, and there's still unmet demand. Parents are constantly trying to find childcare openings, especially for infants.
Infant care is often the hardest category to access because there are fewer available spots due to lower teacher-to-child ratios. Many infant openings are already spoken for by families who have older children enrolled. As a result, demand continues to outpace supply, particularly among younger age groups.
Powills: Let's shift to financing. Let's say I'm a prospective franchisee and I've decided this is the industry I want to enter. What should I expect from a financing standpoint? How much cash do I need, and how does the process generally work?
Martin: Every franchise has its own liquidity requirements, and once you narrow down a brand, they'll help outline those expectations. The amount of cash you'll need depends largely on the type of project.
At the higher end, if you're building a facility from the ground up, you may need around $1 million in equity injection and post-closing liquidity. Banks want to see that you have funds available both for the project and for stability after closing.
At the lower end, some brands offer build-to-suit opportunities where a developer constructs the school and you lease the facility. In that case, you're primarily responsible for franchise fees, equipment and working capital. Those projects are typically around $1 million total.
With SBA financing, borrowers generally contribute between 10% and 15% of the total project cost, depending on the loan structure.
Powills: Can working capital be financed, or does that need to come from my own cash reserves?
Martin: It can absolutely be financed. With SBA lending, the total project cost includes everything necessary to get the business open and ramped up to profitability. Working capital is actually a significant portion of that.
For a new school, working capital is often between $450,000 and $500,000. That's designed to support operations until the school reaches break-even, which typically occurs between months eight and 12.
Powills: Is there a lender preference between owning the real estate and leasing a build-to-suit facility?
Martin: Not really. The loan structure changes depending on the model, but neither is inherently better. It's largely dependent on the market, the franchisee's goals and what opportunities are available.
In some markets, owning the real estate simply isn't practical. In others, it makes perfect sense. Banks certainly like real estate collateral, but that's not the primary factor. We're underwriting based on projections, cash flow and the borrower's ability to service the debt.
Powills: From a borrower's standpoint, is approval based entirely on the financials, or does personality play a role in how much confidence a lender has?
Martin: Personality absolutely matters. Obviously, having the financial resources to complete the deal is important. It's also helpful when there's additional household income supporting the family during the startup phase. For example, it often works well when one spouse is launching the business while the other continues working.
But beyond the numbers, I'm evaluating the person. I want to understand why they want to get into education, what motivates them and what experiences they've had that will help them succeed.
A lot of that comes down to conversation. Do they have the grit and work ethic necessary to start a preschool? Because it is a tremendous amount of work in the beginning. You'll be doing things very different from what you're used to in a corporate environment. You're working with families, children and staff. It's a much more personal business.
Powills: So what I'm hearing is that your drive and desire can influence whether you're approved for a loan.
Martin: Absolutely. When you look at the top education franchises, they have very low failure rates. When schools fail, it's almost always related to the operator. It's usually absentee ownership, lack of involvement, not putting the right people in place or simply not having the drive and commitment required to make the business successful.
Powills: In all your years doing this, are there certain qualities that immediately make you say yes or no?
Martin: Definitely. Sometimes you talk to people and they don't have a strong work history. Their reasoning for wanting to buy the business is simply, "I've heard these make a lot of money." For me, that's a red flag.
I'm trying to determine whether this person is a hard worker. Do I think they're a good person? Do they have the personality to work with parents who may be upset? Do they come across as welcoming and empathetic? Because that's a huge part of being an owner.
I'm evaluating them not just as a businessperson, but as a communicator and as someone who will represent the business in their community.
Powills: It sounds similar to how a franchisor evaluates franchise candidates. You're motivated to find the right people because if they're successful, they'll come back and finance a second, third or fourth location with you.
Martin: Exactly. The lender takes the most risk on the first school. But if that franchisee succeeds, they're likely going to return for future locations. That's what lenders hope for. We want to help people build successful businesses and continue growing alongside them.
Powills: Walk me through the process. Do I get approved by the franchisor first and then pursue financing, or do I talk to the bank first?
Martin: Generally, you start with the franchisor. Most franchise systems have a screening process that includes a financial review, a credit review and interviews. Many also have a Discovery Day or other evaluation process.
Once you pass that stage, the franchisor helps identify a location, a development opportunity or an acquisition candidate. They begin building out the project costs and putting the deal structure together.
By the time the opportunity reaches a lender, much of that work has already been completed. Most of my deals are referred directly by franchisors. Occasionally, I'll work with a prospective franchisee earlier in the process, especially if they're exploring multiple sites or looking at an acquisition. But typically the franchise system introduces us.
Powills: There's another important takeaway here. If a lender like you is working closely with a franchisor, that's another signal to prospective franchisees. You're only going to work with brands you believe have a strong chance of success.
Martin: Correct. We rely heavily on franchisors throughout the underwriting process. We're leaning on their vetting of franchise candidates. We're leaning on their site selection process. We're relying on the market studies and reports they've completed.
When we're discussing opportunities with our credit teams, we're looking at whether we trust the franchisor's process and whether they've demonstrated success over time. We're looking for franchisors with strong performance metrics, strong scores and proven track records. Those are the systems that lenders feel most comfortable supporting.
Powills: That's fascinating because many franchise buyers spend so much time reviewing marketing materials and Item 19s, but what you're talking about is deeper due diligence. You're looking at closures. You're looking at long-term success rates. You're evaluating how the franchisor screens franchisees. You're looking at how they support operators after they open. Those are the things that really determine whether a business succeeds.
Martin: Exactly. I talk to a lot of people before they even sign their franchise agreement. Many franchisors encourage those conversations because they want candidates to understand the financing process early.
I enjoy those conversations because it allows me to share what I've learned and help people understand what they're getting into. Many franchise systems also have former bankers or financing specialists on staff who help candidates review financial statements, answer financing questions and prepare for the lending process. Getting involved early gives everyone a better chance of success.
Powills: Let's talk specifically about Children's Lighthouse. What stands out to you about the brand from a lender's perspective?
Martin: If we're looking purely at the data, Children's Lighthouse performs exceptionally well.
One of the primary tools lenders rely on is a FUND report, which provides a FUND score. Across franchising, education brands tend to perform very well, and Children's Lighthouse is no exception. Their FUND score is 805 out of 950, which is extremely strong. They also have a very high unit success rate. Over the last eight years, their unit success rate is 97.3%, and over the last five years, it's 100%.
In addition, their unit revenues have grown significantly. Since 2021, average revenues have increased from approximately $1.1 million per location to more than $2 million per location. When you combine strong revenue growth, expanding unit counts and outstanding operating performance, it paints a very positive picture for lenders. The financials look strong. The brand is growing. Very few locations are closing. They're expanding into attractive markets. All of those factors make Children's Lighthouse a very attractive franchise system for lenders.
Powills: The title of this webinar is "Why Children's Lighthouse Franchisees Have an Easier Path to Funding." Is that actually true?
Martin: Yes, it is. The biggest reason is the data. When you're financing a new location, you want confidence that the business model works. With Children's Lighthouse, we can see that it has worked repeatedly.
Out of roughly 90 locations, none have closed over the last five years. That gives lenders confidence because we're looking at a business model that has been tested and proven over and over again. It's repeatable and repeatedly successful. That makes lending decisions easier because we aren't making assumptions. We have years of performance data that demonstrate success.
Powills: So it isn't just the concept itself. It's the franchisor and the support system behind it.
Martin: Exactly. Most lenders are looking to the franchisor to provide support throughout the process. That includes training, facility design, operational guidance, and helping franchisees understand state licensing requirements.
If someone were trying to build a preschool on their own without that support, there would be a tremendous amount to learn. The franchise system has already built those processes. They've done it before. They know what works. That support reduces risk and increases the likelihood of success.
Powills: One thing I've found fascinating during this conversation is how much of the due diligence process happens through lenders.
I've been in franchising for more than 20 years, and franchise buyers often rely on brokers, portals, and marketing materials. But the information you're sharing goes much deeper. You're looking at unit closures. You're looking at long-term success rates. You're evaluating the franchisor's leadership and systems. If I were buying a franchise, I would want to hear what you're saying because it tells me whether I've chosen the right brand.
Martin: And I do have those conversations with people. Many of the franchise systems I work with encourage prospective franchisees to speak with me before they sign an agreement. I enjoy those conversations because I can share information about financing and help people better understand the process.
Many franchisors also have financing specialists or former bankers on staff who assist candidates with questions about lending, liquidity requirements and preparing for financing. Those conversations on the front end can be extremely valuable. The earlier we can get involved and understand the prospective franchisee, the more effectively we can help guide them through the process.
Powills: Before we wrap up, what final thoughts would you leave people with about education franchising?
Martin: I remain very bullish on this industry. It's a great business to be in. It allows people to own a business while still maintaining a family-oriented lifestyle. In many ways, it gives owners the opportunity to build something meaningful while still having nights and weekends with their families.
It's also rewarding because you're providing an important service to your community. You can step back and feel good about the impact you're making. From both a financial and banking perspective, the model simply makes sense.
Banks want to lend to premium franchise systems like Children's Lighthouse because the performance data supports it. There are plenty of lenders available, but it's important to work with one that understands the childcare industry and has experience financing these types of businesses.
At the end of the day, getting the absolute lowest interest rate isn't always the most important thing. Getting your loan closed and getting your school open is what matters most.
For anyone considering entering the childcare business for the first time — or looking to expand existing operations — I would be happy to have that conversation. I love talking about businesses, and I especially love talking about childcare.
Powills: Is "future franchisee" eventually going to be part of your title?
Martin: Maybe. When you spend enough time looking behind the curtain and seeing how these businesses operate, it's hard not to appreciate the opportunity.
Powills: That's something I keep hearing. People who get an inside look at this industry often end up wanting to participate themselves. For anyone focused on long-term wealth creation, especially if they own the real estate, this can be an incredible vehicle for building generational wealth.
Samantha, thank you for sharing your insights today.
Martin: Thank you. I really enjoyed it.
Powills: For Samantha Martin, I'm Nick Powills. Thanks for joining us for another episode of “Meet the Franchise.”
Watch the full webinar here.
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