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Even With a Map, the Road Is Rocky
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Lenders are inspecting prospective franchisees' finances with a more critical eye these days and will demand a signed lease, or at least a letter of intent, before approving a loan, said Edward Lawings, president of EWL Financial, who coached participants at the IFA seminar on such subjects as cash flow, collateral and credit ratings.
"If you have a credit score of 660 or higher, you pretty much can go to any bank in the area," Lawlings said, speaking to an audience that overflowed from a conference room into a hallway. "If it's lower than that, ask if they have a special program for people with scores under 660."
Most lenders will insist that franchisees back their loan with personal property and investments, and they recommend against funding the new business with credit cards.
"We want to see a business plan, a bio of their experience, a balance sheet, and if they never had another business we look for their income statements: tax returns, credit history, records of assets liability and net worth," said Andrew Nadler, senior vice president of leasing for Combined Properties, a shopping center management company in the Washington region. "We'd never want to put someone in the business and then see them fail."
Jeff Pollak, principal retail strategist for the Bethesda retail brokerage firm StreetSense, said aspiring franchise operators have to be smart about picking which business they want to do. "We know, for example, we're not going to put one more food store in a shopping center if there's already three," he said.
Swain and his partners, Timothy Fitzgerald, Curtis Leftwich and Ruston Spurlock, are betting on the fact that people working at and visiting the new Bureau of Alcohol, Tobacco, Firearms and Explosives building at 200 Florida Ave. NE will need to eat lunch. They have also gotten help from Richard Mazur, who owned and operated McDonald's franchises for 40 years, and Curtis's father, Willie Leftwich, a retired D.C. attorney.
They are following what experts suggest are keys to success in franchising, which also include good people skills and organization.
Franchisees say that good humor and a philosophical bent can also make a difference.
"How long does it take to climb a mountain?" said Will Gist, who has launched at least three Maui Wowi Hawaiian coffee and smoothie franchises in the Washington area. "When you get there, how long do you stay? It's boring to be at the top. The fun is in the journey. The fun is in the ride."
