IFA Webinar Shines Spotlight on Franchising’s Current and Expected Growth, Gives News on SBA Loans
Two speakers presented an overview on the near-term future of franchising, rebutted money myths, and delved into Small Business Administration loan processes on Thursday during an International Franchise Association webinar. Headlining the webinar were Edith Wiseman, president of FRANdata, which conducts franchise-focused research and provides advice on lead generation, target marketing and performance analysis, and Reg Byrd of lending specialist Benetrends Financial.
Wiseman stated that the American economy has “been a wild ride, and it’s going to continue to be a wild ride, but franchising will be a stabilizing force.” To support that last assertion, she noted that franchising’s growth should outpace the U.S. gross domestic product, at 4.3% and about 2%, respectively. She also mentioned a key statistic from the IFA 2024 Franchising Economic Outlook report, which is produced by FRANdata: Over the next year, total franchise output is expected to rise by 4.1%, from $858.5 billion in 2023 to $893.9 billion in 2024.
Franchising growth is being driven by consumer demand, Wiseman said. And she pointed out that when interest rates decline as expected later this year, “consumers are going to feel a little richer,” and franchises will benefit from their loosened spending.
Personal Services Growth
So where will growth be concentrated? Wiseman and the IFA report said the top spots will be occupied by personal service brands and food, particularly quick-service restaurants, as reported earlier on FranchiseWire. Residential services brands are also strong, she said, and will be third in growth.
“All lenders and private equity firms want to invest in personal services,” Wiseman said. The IFA 2024 Economic Outlook report defined these services as being related to beauty, child care, education, health and fitness, moving, pets, recreation, sports, storage and travel. In 2024, the personal services sector is projected to grow by 3% to 124,508 units, the report stated.
For details about franchises’ performance in 2023 and projections for 2024, she encouraged webinar listeners to read the IFA 2024 Economic Outlook report and pay special attention to statistics regarding the industries they are invested in or later may invest in.
Debunking Three Myths
In closing her presentation, Wiseman exposed two myths about lending to franchisees. One myth, she said, is that entrepreneurs who want to invest in small franchise systems/emerging franchises can’t get financing. “Franchisees from all sizes of franchise systems can get financing,” she emphasized. The second myth she mentioned is the notion that “small-dollar loans don’t get financed.” Wiseman said that the “average loan size for franchisees actually declined from 2022 to 2023.”
Reg Byrd, president of small business administration and bank financing for Benetrends Financial, piggybacked off Wiseman’s myth-busting to start his presentation. There’s a myth that “banks aren’t lending,” said Byrd, whose company helps entrepreneurs find the funding they need. Banks absolutely are lending, he said, and today’s interest rates aren’t a problem: “Higher interest rates benefit banks.”
SBA Loans
Even today, “SBA loans are very accessible,” he said, and they’re easier for franchisees to nail down as opposed to someone who wants money for a non-franchise start-up. SBA loans also have lower interest rates than standard commercial loans, he said.
Byrd gave the following overview on qualifications for SBA loans:
- The borrower must have skin in the game.
- Experience in the industry is helpful but not required.
- Lenders will generally want collateral. Nearly all will place a lien on the borrower’s personal real estate, for example.
- The borrower must submit a business plan and financial projections, typically going three or five years out. The business plan is about the borrower and not just the business itself.
- The borrower’s credit history and score are important.
“There are five C’s involved in SBA lending: Character [of the borrower], capacity to repay the loan, capital needed, conditions [this includes the borrower’s credit history and a franchise’s financial performance] and collateral,” he said.
Many aspiring business owners have fears about the hurdles of securing an SBA loan, Byrd said – but they shouldn’t. “The SBA loan program is wonderful!”
