There are many keys to ensure success for a franchise. Right business model, quality customer service and even outstanding products. But in order to achieve that success a brand will need to acquire the right financing to fund said business. Financing can be a tricky area for prospective business owners to navigate, but they may be in luck in 2016. Mike Rozman, chief executive officer for BoeFly, said franchise financing had a banner year in 2015 and that success will carry over to the new year. We sat down with him to discuss what he thought about the year in franchising and what to expect in 2016.
1851 Franchise: What were the biggest trends you saw in franchising in 2015?
Mike Rozman: In my corner of the franchise world – financing – the biggest trend I’ve seen in 2015 is the growth in competition amongst banks. This is a very good development for existing franchisees looking to grow and especially good news for new franchisees. It’s worth noting that when dealing with startup financing for new franchisees, the most significant feature of competing lending institutions is not rate or loan term but rather speed. Because such a significant amount of startup loans for new franchisees go the SBA route, where rates are statutorily capped, the area where banks are most able to compete is speed of funding – in other words, the competition lies not with who offers the best rate but rather who offers the fastest money.
1851: Was 2015 kind to the franchising industry?
MR: 2015 was a very positive year for franchise financing. Capital flowed more freely than it did in 2014. Brands that have a compelling model, a reasonably proven track record, and that are awarding franchises to worthy new partners had appropriate access to capital for their new and existing franchisees.
1851: Do you see any of the successful trends from 2015 carrying over to 2016?
MR: 2016 will be more interesting to watch than past years because we’ll likely see how the market responds to the first Fed rate hike since the global financial crisis. My instinct is that the average franchisee will still be able to secure the capital that they require to grow, but it may feel like the winds are shifting from a clear tailwind to a minor headwind.
1851: What are the biggest franchise growth trends that that you see happening in 2016?
MR: The biggest trend to watch is that brands will be getting far more sophisticated in how they generate franchise leads, how they convert those leads to become franchisees and equally important, how they invest in both. For example, one trend we saw in 2015 that I think will continue to expand in 2016 is the growing adoption of BoeFly’s bQual report as a lead conversion tool for franchise development officers. Being able to identify serious franchise candidates by whether or not they are embracing a free assessment of their franchise financing capacity is proving to be an increasingly attractive tool for brands to deploy as part of their early development process.
1851: Why do you see this as a good thing?
MR: I think it’s a very good thing that brands will be relying more on smarts than bulk lead processing. It will result in a higher lead-to-franchisee yield which is a better use of shareholder resources.
1851: Are there any obstacles from 2015 that could affect franchises in 2016?
MR: The political climate was tangibly unfriendly to the franchise market in 2015, which cast a long shadow and will continue to do so in 2016. Expect more controversy around the joint-employer issue as well as minimum wage hike concerns.
1851: Are there any technology improvements you would like to see happen for the industry in 2016?
MR: One item franchise brands had on their 2015 wish list was for suppliers to work together to securely share information so that the franchise sales staff didn’t have to login to multiple systems. We at BoeFly heard this loud and clear and we partnered with FranConnect so that our mutual clients could access important financing progress data right within the brand’s CRM – FranConnect. We expect this pressing need for seamless sharing amongst trusted partners to accelerate in 2016.