financing alternatives for international franchising martin francis senior manager global &...
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Financing Alternatives for International
FranchisingMartin Francis Senior Manager
Global & Corporate Franchising
HSBC Bank
Nathalie
DubiezHead of FranchisingHSBC France
HSBC Group
• Committed to international business with 10k offices in 83 countries and territories including commercial banking in 55+ countries
• Developing franchise finance internationally
HSBC Group• Dedicated franchise specialists • Franchise profiles• Local introductions • International co-ordination from UK
with 20+ years’ experience• International banking services, e.g.
centres to facilitate account-opening, cash management
Financing of Franchising
• How banks view franchising• Franchising into a country - how banks
can help• When to raise financing with bank• Options for franchise finance overseas• How franchisors can help their
franchisees• Summary
How banks view franchising • Improved risk/return compared with
equivalent non-franchise operations– lower failure rate– proven market for goods/services – tried and tested systems– ongoing support and training
• Wide range of industries in a significant and growing business segment
How banks view franchising• Opportunity to develop relationship
with – franchisor– franchisor’s overseas
operations/partners– sub-franchisees
• Major banks have franchise specialists
How banks can help
Franchise Specialists - franchise unit• Maintains relationships with:
– franchisors, franchise professionals, franchise industry association, e.g. British Franchise Association, whose awards HSBC sponsors
• Handles PR, marketing, exhibitions, seminars, training, market intelligence
How banks can help
Franchise Specialists - franchise unit• Guidance about franchising -
website/guides• Tailored packages for franchisees with
lending up to 70% of start-up/working capital needs for established names
• Internationally-oriented banks can assist franchisors taking concept overseas
When to raise financing with bank• Consult bank at early stage• Bank will want to assess franchise
viability• Importance of professional advice• Pilot operation seen as vital to
prove concept in a new country, however well established overseas
Options for franchise finance overseas
Bank will consider:• Franchisor’s business concept :
– local customer proposition/financial model
• Franchisor’s international strategy• Franchisor’s track record overseas• Resources available - management
and financial
Options for franchise finance overseas
Bank will consider structure:• direct • JV• area developer• master franchise
Options for franchise finance overseas
Master franchisee• Equity/debt split • Venture capital/equity finance
– Business Angels/Regional Development Agencies
• Full range of business lending products
Options for franchise finance overseas
Franchisees• Full range of business lending products • Franchise-specific arrangements
efficient• 50%-70% of start-up costs/working
capital• Costs - interest and fees take into
account the risk evaluation (including stake/security)
Options for franchise finance overseas
Franchisees• Loan
– term tied in with franchise agreement – flexible capital repayments possible
• Working capital facility• Factoring/Leasing/Vehicle finance• Money transmission• Security/collateral
– support from Govt bodies e.g. SFLG/SOFARIS
How you can help your franchisees
What do banks look for from franchisors?• Franchisor’s financial information and
strategy/business plan• Franchisee selection
criteria/training/support• Existing franchisees’ performance• Terms of franchise agreement
– upfront and ongoing fees/performance conditions/term
How you can help your franchisees
What do banks look for from franchisees? • Background to franchisee• Business plan - how will franchise
succeed in local environment?• Franchisee’s ‘survival budget’,
including a breakeven analysis within realistic profit and cash flow projections
• Security/collateral
How you can help your franchisees
Other considerations• Language• Ways of doing business• Legal differences• Real estate issues• Staffing• Supply chain
Summary• Franchising is a key part of
commercial activity in many countries
• Good market for banks to source new business
• Talk to the banks at an early stage and help bank to understand how your concept will operate
Martin Francis, Senior Manager Global & Corporate Franchising HSBC Bank plc, Level 32 London E14 5HQ +44 (0) 207 991 0792 [email protected]
Nathalie Dubiez,
Responsable Marché de la FranchiseHSBC France, 75419 PARIS cedex 08
Tel: + 33 (0)1 40 70 26 09Email: [email protected]