In the competitive world of franchise lending, a company’s name recognition, reliable reputation and a support team that backs its franchisees to help drive success go a long way with financial institutions seeking investment opportunities.
Eric Schechterman, chief development officer for Benetrends Financial, knows this and likes to use it to the advantage of his prospective WellBiz Brands portfolio franchisees seeking loans for new locations.
“I have an easier job getting a Radiant Waxing™ deal done because I can show the bank that it’s part of a larger conglomerate that’s all under one roof and operates the systems, the operations, the marketing – all of that,” Schechterman says.
That’s why Benetrends and ApplePie Capital® are some of the preferred lenders franchisees with a WellBiz Brands portfolio franchise use. Both specialize in helping to secure loans for new and existing franchisees. They also see the broad lending appeal of WellBiz Brands as a benefit to their customers, especially in an economic climate rife with uncertainty.
“In this environment where things are kind of volatile, we’re working with brands from platforms like WellBiz Brands that are well-established,” says Jamie Davis, vice president of business development at ApplePie Capital. “We take a brand-first approach. What we try to do is work with brands that have a solid track record of getting open and staying open.”
Reputation and Support Ease Financial Climate Challenges
The news headlines about the economy can be deceiving when it comes to franchising and the beauty and wellness industry. While both Davis and Schechterman anticipate a tightening of the credit market, they expect companies like WellBiz Brands to be less affected by any downturn.
“Credit is tightening, but the brands and portfolio companies we work with, like WellBiz Brands, likely aren’t going to see a significant blip in access to capital,” Davis says. “We’re able to help several of the WellBiz Brands with new franchisees and new brand locations, which is going to be the challenge as credit begins to tighten. It’s going to be those startup businesses that are a little tougher to fund. Because we’ve gone through the vetting process with the Drybar®, Amazing Lash Studio® and Elements Massage® brands, we’re able to lend to new franchisees and new locations with a conventional product.”
When the credit market tightens, it doesn’t mean banks don’t have money to lend. It’s just a more selective process than it has been in the past.
“Yes, banks have more appetite, and yes, banks are looking for more opportunities,” Schechterman says. “But there are more opportunities out there than there are banks. It still comes down to what the banks are looking for.”
And the companies that have proven track records with resources to help set up new and existing franchisees for success, i.e. staying open and paying off the loan, traditionally get preference over startups. WellBiz Brands’ approach provides significant resources to their franchisees that include ongoing training, recruitment support, marketing and purchasing power.
Lending Options Depend on Number of Locations
Whether a franchisee is seeking to fund their first or fifth location can determine which financing option is best for them.
Most of Benetrends Financial’s franchising business comes from first-time owners. While the company has a variety of lending options, the most common type used is rollover funding, in which a franchisee uses an existing 401K retirement account toward opening a business.
One of the original architects of that type of funding mechanism was Benetrends’ founder, Len Fischer.
“The rollover is probably more of what we do, but over the years Small Business Administration (SBA) loans have become a bigger part of what we do, as well,” Schechterman says.
ApplePie Capital caters to new and existing owners who want to expand their reach with multiple locations. Through this, they offer various products that sometimes require no out-of-pocket cash and capitalize on existing equity.
“We can work with existing franchisees who are looking to unlock embedded equity within their businesses, so they can potentially need no cash out-of-pocket for their second, third and fourth locations,” Davis says.
And in the case of both companies, using government-backed loans through the SBA is always an option, although not the fastest.
“We are set up for growth,” Davis says. “Essentially, we fund the loan, and the franchisee gets to work. They don’t have to worry about coming back and having inspections and all that.”
That can mean a difference of weeks versus months in getting funding, Davis adds.
There’s a bullish outlook for the beauty and wellness franchising business in 2023. Part of that is due, in part, to the fallout from the pandemic.
Consumer spending is expected to continue within the wellness and beauty sector, with customers reprioritizing their spending on experiences, rather than possessions, both Davis and Schechterman say.
And while there has been some decline in other sectors and increased borrowing rates, both are seeing a willingness from banks to lend to established brands with proven track records.
“I think we’ve got a positive outlook on the industry and WellBiz Brands in particular,” Davis says. “What we’re going through right now is nowhere near the 2008-2009 Great Recession scenario. It’s different altogether. I think franchising in general holds up well in a scenario like this.”
Disclaimer: ©2022 WellBiz Brands, Inc. (“WBB”). Each franchisee location of a WBB portfolio brand is independently owned and operated. Franchise owners (or their designated hiring managers) are solely responsible for all employment and personnel decisions and matters regarding their independently owned and operated locations, including hiring, direction, training, supervision, discipline, discharge, compensation and termination of employment. WBB is not involved in, and is not responsible for, employment and personnel matters and decisions made by any franchise owner. All individuals hired by franchise owners’ studios are their employees, not those of WBB. Benefits vary by independently owned and operated studios. Amazing Lash Studio®, Elements Massage®, Fitness Together®, Radiant Waxing™ + designs are trademarks owned by each of their respected company or their affiliates. Drybar® + design is a registered trademark owned by Helen of Troy Limited and used by DB Franchise, LLC under license.