A sound move

Franchise Finance has been helping franchisees to finance their equipment since 1979. Originally established as a specialist printing equipment finance business, one of their first customers was Prontaprint. Nick Potter, founder of the business, explains: 'I had a call one day from a Prontaprint franchisee who had seen one of our advertisements and told me to contact his franchisor in Darlington as they were in need of a good leasing scheme.' Being a Londoner, Nick wasn't even sure he knew where Darlington was but after looking it up he ventured north for a meeting.

Nick then spent the next few years travelling the country to sign up lease agreements for new Prontaprint franchisees, followed by Kall Kwik, AlphaGraphics and Minuteman Press, all major print franchises. Recognising the opportunity, he decided to focus exclusively on the franchise sector and changed the name of the business to Franchise Finance.

Fast forward to today and Franchise Finance works with a large number of diverse franchise systems such as Dollond & Aitchison, the opticians, Sumo - the subsurface detection service - and O'Briens Irish Sandwich Bars to name but a few. They are also affiliate members of the British Franchise Association.

Stuart Walsh, managing director of Franchise Finance explains: 'Our service applies to any franchise that has an equipment element, be that shop fittings or industrial equipment, vehicles or office equipment. This allows us to work with a broad range of different customers with one unifying component, they are all franchises. We look for the franchisor to demonstrate a sound concept and ethical practice.'

Leasing can provide franchisees with a fixed monthly payment to cover their equipment requirements, spreading the cost over the useful life of the equipment. The fixed nature of the payments makes it easy for franchisees to budget and removes the uncertainty of changing interest rates.

Stuart continues: 'We always say that franchisees should have a balanced mix of funding that includes elements of cash, bank loan and leasing, and not put all their eggs in one basket.'

Leasing can be used to finance the tangible items in the franchise such as capital equipment, vehicles, IT and Telecoms. However, it can also be applied to items such as shop fittings and computer software.

Once a scheme is in place with the franchisor, each new franchisee needs to be approved for finance, but this is quite a straightforward process. It usually requires a copy of the franchise application form, business plan and a personal credit search on the franchisee. A decision will typically be received within 48 hours.

If several different suppliers make up the equipment package, this can be accommodated quite easily on the lease, although the timing of payments to the suppliers needs to be co-ordinated.

'With the outlook for the economy producing increased pressure on cash resources, leasing could prove to be a sound move in 2008,' Stuart concludes.