John Allbrook has joined the board as chairman of Franchise Finance, a company that supplies finance to the franchise industry. By Brian Cantwell
"Franchise Finance is a specialty finance business; it’s independent," says Allbrook.
"It’s established a great reputation among the franchise community. It provides a variety of services to franchisees, from helping them to write their business plans, to identifying the right kind of finance to get that business off the business plan and into operation.
"And that ranges different kinds of finance – it could be working finance capital through the dedicated financing units of some of the banks; it could be straightforward asset finance. We are very good are doing that, and have a good conversion rate from the number of opportunities we see to the number of deals we finance for the franchisee."
The franchise market is relatively mature for writing leases, because of the maturity of the decision-makers and their combined experience," says Allbrook.
"The average age of franchisees is 49 – people who have had some level of success in their career, and have probably generated some capital because they are about to invest that capital in a franchise. They are more experienced, and keener to work for themselves. They have that level of experience which gives them a greater chance of being successful, and, of course, if the franchise itself is successful they are being introduced to a model that already has a road map that works. I love that side of the business. There is something like six or seven hundred different franchise models at work in the UK at moment, and 80% of those are British."
"If you have a legitimate business model, then a good way of expanding it is through a franchise network. There are something like 700,000 people employed in franchise in the UK, and £15bn (19.2bn) of GDP comes from it. If you talk to the banks, and the good franchisors, then the reports will conclude that there’s very little delinquency; if franchisees get into difficulty, the franchisor will help them out. It’s not in their interest to have a model that is going wrong."
Leasing Life asked Allbrook about the current economic conditions that allow SMEs to thrive.
"We have never seen an extended period of low interest rates as we have in the last 10 years. It’s amazing. The bank base rate is stuck at around half a percent, and hasn’t even moved. It’s very unusual. Obviously when you have come out of a correction like 2008, and it got very heated in 2006/2007, it’s understandable that people are risk aware. Debt is more freely available now in terms of deal debt. I think there are some interesting players out there. Whether or not they are appropriately provisioned or whether they have got the right credit and collections behaviours in place, only they will actually know."