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03.31.08
QSR Magazine
A few tips for franchisees seeking finance options.
The dominant theme of restaurant franchising
is growth, and growth takes money. And
money for growth typically means seeking out
financing.
John Rinaldi, president of Irwin Franchise
Capital, has one big piece of advice for franchisees
looking to do business with a lender: full
disclosure. "Give all the information up front,"
he says. "We dig so deep when we do our underwriting,
it's highly likely we'll uncover all the
different areas we need to discuss. If there are
extenuating circumstances or issues, deal with it
up front. Pre-empt our questions."
As the head of a national leader in franchise
finance, Rinaldi knows whereof he speaks. Irwin
deals regularly with about 30 concepts and is
pre-qualified with 50. Regardless of concept,
though, Rinaldi notes that Irwin can likely help
any franchisee who's in decent financial condition
and in need of capital. They also have no restrictions
on lending into smaller brands, provided the
franchisee is credit-worthy.
Irwin, like most franchise lenders, likes to
deal with established concepts that are financially
sound themselves. Their primary business is
new builds-that is, helping existing franchisees
expand by opening new restaurants. "We look to
do both equipment and real estate, but we don't
have to do both," says Rinaldi.
There are other facets of the finance business
also aimed at aiding growth. Irwin can do refinancing
of existing debt, so a franchisee might
be able to pull out some equity and use that to
assist in expansion. They finance acquisition of
existing stores, whether it's a franchisee-to-franchisee
or franchisor-to-franchisee sale. They also
do re-imaging and have programs in place where
certain franchisors recommend Irwin as a lender
for re-imaging projects.
"We're very active and interested in helping
franchisees grow," Rinaldi says. "We're
committed to it. We've got 80 people working
here who do franchise lending. The objective
is to grow relationships. A significant portion
of our business is with existing customers
doing new business as they
expand."
In terms of qualifications, Irwin generally
looks for a franchisee who has three or more
existing stores, which should be performing at
the average for the area of the country they're in.
Store trends should be positive, and if the trend
happens to be flat, it should be consistent with
the system. (And, of course, an ability to pay debt
goes without saying.)
Rinaldi offers two final pieces of advice to
franchisees looking for financing from any lender.
First, being in a good, growing system is always
a plus. Second, the amount you request to borrow
should be consistent with the model for the business.
Don't over-leverage yourself-make sure
you put some equity in on real estate.
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