The recent CIT Group news hit the franchise community late last week. One of the larger small business lenders announced, CIT Group announced it needed additional money from the government to stay affloat. The government denied their request but CIT was able to cut a deal with its creditors giving them a little more time to develop a comprehensive solution.
Franchising, like starting any small business, requires a financial investment and risk. I like to use the old adage … if it were easy, everyone would do it. With a large small business lender struggling, franchisors are getting more creative with their ability to help franchisees and others use a proven business model to own their own business. A good example of that is Marco’s Pizza.
Marco’s has decided to take the issue of financing into their own hands. According to a press release, to help current and potential franchisees overcome the credit crunch, Marco’s Pizza has created several innovative financing tools.
To help with store down payments, Marco’s introduced a private equity fund that can invest $50,000 to $100,000 per store. The company is also developing a $50,000,000 private equity fund that would finance up to $250,000 of a new store’s costs, depending upon the franchisee’s investment. Those eligible for both programs must either have proven experience in the franchised food service industry or be current Marco’s Pizza franchisees.
“Marco’s Pizza’s year-to-date growth is outstanding given the tight credit environment,” said Marco’s CEO Jack Butorac. The company achieved more than ten percent chain growth in the first half of 2009. “These financing tools were recently introduced to help increase Marco’s growth rate through franchisee candidates and expanding franchisees facing credit challenges.”
“The due diligence of our credit providers is impressive and, I believe, a major validation of Marco’s business,” CFO Ken Switzer added.
Marco’s also offers franchisees the opportunity to lease complete stores through its captive leasing company. The program can provide up to $200,000 in financing for a new store. Marco’s is also developing a new leasing program that can provide up to $125,000 of equipment-only financing per store.
Many other franchisors assist in financing. Some home-based franchise opportunities will help finance the franchise fee and others will provide short term loans to help you get your business off the ground. As the credit markets continue to evolve and as people continue starting new businesses, be sure you thoroughly investigate financing options to give yourself the lowest interest rate and the best opportunity for success!