Financing Alternatives for
International Franchising
Martin Francis
Senior Manager
Global & Corporate
Franchising
HSBC Bank
Nathalie
Dubiez
Head of
Franchising
HSBC France
HSBC Group
• Committed to international business with
10k offices in 83 countries and territories
including commercial banking in 55+
countries
• Developing franchise finance
internationally
HSBC Group
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Dedicated franchise specialists
Franchise profiles
Local introductions
International co-ordination from UK with
20+ years’ experience
• International banking services, e.g.
centres to facilitate account-opening,
cash management
Financing of Franchising
• How banks view franchising
• Franchising into a country - how banks
can help
• When to raise financing with bank
• Options for franchise finance overseas
• How franchisors can help their
franchisees
• Summary
How banks view franchising
• Improved risk/return compared with
equivalent non-franchise operations
– lower failure rate
– proven market for goods/services
– tried and tested systems
– ongoing support and training
• Wide range of industries in a significant
and growing business segment
How banks view franchising
• Opportunity to develop relationship with
– franchisor
– franchisor’s overseas operations/partners
– sub-franchisees
• Major banks have franchise specialists
How banks can help
Franchise Specialists - franchise unit
• Maintains relationships with:
– franchisors, franchise professionals,
franchise industry association, e.g. British
Franchise Association, whose awards
HSBC sponsors
• Handles PR, marketing, exhibitions,
seminars, training, market intelligence
How banks can help
Franchise Specialists - franchise unit
• Guidance about franchising website/guides
• Tailored packages for franchisees with
lending up to 70% of start-up/working
capital needs for established names
• Internationally-oriented banks can assist
franchisors taking concept overseas
When to raise financing with
bank
• Consult bank at early stage
• Bank will want to assess franchise
viability
• Importance of professional advice
• Pilot operation seen as vital to prove
concept in a new country, however well
established overseas
Options for franchise finance
overseas
Bank will consider:
• Franchisor’s business concept :
– local customer proposition/financial model
• Franchisor’s international strategy
• Franchisor’s track record overseas
• Resources available - management and
financial
Options for franchise finance
overseas
Bank will consider structure:
• direct
• JV
• area developer
• master franchise
Options for franchise finance
overseas
Master franchisee
• Equity/debt split
• Venture capital/equity finance
– Business Angels/Regional Development
Agencies
• Full range of business lending products
Options for franchise finance
overseas
Franchisees
• Full range of business lending products
• Franchise-specific arrangements
efficient
• 50%-70% of start-up costs/working
capital
• Costs - interest and fees take into
account the risk evaluation (including
stake/security)
Options for franchise finance
overseas
Franchisees
• Loan
– term tied in with franchise agreement
– flexible capital repayments possible
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Working capital facility
Factoring/Leasing/Vehicle finance
Money transmission
Security/collateral
– support from Govt bodies e.g.
How you can help your franchisees
What do banks look for from franchisors?
• Franchisor’s financial information and
strategy/business plan
• Franchisee selection
criteria/training/support
• Existing franchisees’ performance
• Terms of franchise agreement
– upfront and ongoing fees/performance
conditions/term
How you can help your
franchisees
What do banks look for from franchisees?
• Background to franchisee
• Business plan - how will franchise
succeed in local environment?
• Franchisee’s ‘survival budget’, including
a breakeven analysis within realistic
profit and cash flow projections
• Security/collateral
How you can help your franchisees
Other considerations
• Language
• Ways of doing business
• Legal differences
• Real estate issues
• Staffing
• Supply chain
Summary
• Franchising is a key part of commercial
activity in many countries
• Good market for banks to source new
business
• Talk to the banks at an early stage and
help bank to understand how your
concept will operate
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Martin Francis, Senior Manager
Global & Corporate Franchising
HSBC Bank plc, Level 32
London E14 5HQ
+44 (0) 207 991 0792
martin.j.c.francis@hsbc.com
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Nathalie Dubiez,
Responsable Marché de la Franchise
HSBC France, 75419 PARIS cedex 08
Tel: + 33 (0)1 40 70 26 09
Email: nathalie.dubiez@hsbc.fr