Franchise Lawyer Blog

Franchising and Financing

On October 22, Julie Cowan Lusthaus wrote a piece on this blog about franchisors helping their franchisees obtain financing in this difficult credit market. In the past couple of weeks, as the credit markets have tightened to the point where they are frozen, it seems as if no one is talking about anything else in the franchising world.

The Franchise Times November/December issue features an article on the steps franchisors are taking to work in a frozen credit market; it also features another piece on the credit contraction, which provides some tips on how to ride it out.

recent article in NuWire Investor discusses how Domino’s is offering short term financial credit solutions to its franchisees. Papa John’s is featured in Nation’s Restaurant News attempting to ease the economic pressures on its franchisees by cutting the price of cheese and trying other short term credit assistance.

Some franchise systems have still found it possible to finance their operations and even achieve expansion, proving that there are still some businesses, at least for now, that may lay claim to the elusive title of being “recession-proof.” Great Clips, Inc. just announced plans for 300 new salons through 2009, aided by $14 million in new financing. The AOL Money and Finance story reporting that development notes that franchises remain a viable source of business development and job opportunity in a turbulent employment market.

We will keep an eye on financial developments as they unfold in the economy as a whole and as they resonate throughout the franchising space. Although there is no question that tightening credit availability will negatively impact on many franchised businesses, all franchisees theoretically belong to a community of businesses with shared needs, hopefully supported by a franchisor with a mutual interest in seeing each of them succeed. That offers many more prospects for support than would be available to the independent business owner.

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