though he expects it to peak or plateau.
“What is undeniable over the past nine
months,” he says, “is an increase in the
number of draws on revolving lines of credit.
If liquidity tightens and folks are pressured,
they will draw down.” Yet as some clients
become more challenged for operating
capital, they’re choosing to hold onto their
real estate as leverage, at least for now.
Any market or economic environment
will always find optimists looking for money
to grow, says Rinaldi. That’s human nature.
So are the bottom-feeders, who thrive in
tough times by picking up assets at bargain-basement rates. Today, as the economy
affects some franchisees, sectors, and regions
more than others, and with some troubled
franchise systems barely hanging on, he’s
seeing more acquisition opportunities for
companies whose model is to buy on the
cheap. For them, these could become boom
times. AD
rience in the franchise space. Now is the
time to take advantage of that.”
➞ Choose a good horse. A well-established concept in a growing system
in an expanding market segment or region will find you plenty of friends in the
lending community.
➞ Have a plan. Especially if you plan on
significant growth. Lenders want to know
that you can manage at the next level.
“Growth has to be controlled. Back it up with
a plan that shows me how you’re going to
do it that makes sense,” says Brian Colburn
of Mount Pleasant Capital (but with Butler
Capital when interviewed for this story).
With the available cash and infrastructure
you have today, how capable will you be
for the next level of growth?
➞ Slow down/retrench. For many
multiunit franchisees and area developers,
this is a good time to ease off the accelerator and focus on fine-tuning their vehicles; to go slower, conserve resources, and
work on the basics to improve operational
efficiencies, same-store sales, training, infrastructure, etc. If you’ve signed an agreement to open so many stores in a given period, see if you can renegotiate the
timetable, rather than overextend yourself
and jeopardize your success to date. Franchisors understand the market today.
“We have seen many potential borrowers say they’re going to pay attention
to existing operations, clean them up,
and look for increased efficiencies,”
says Rinaldi. And when the taps begin to
open once again, those operators will be
poised for growth.
