A few franchisors offer innovative financing programs for franchisees. Valvoline Instant Oil Change Franchising Inc., which runs more than 500 franchised and company-owned auto oil-change and fluid-maintenance shops, offers a variety of franchise financing options.
"We've found that financing is a big motivator," says Les Fry, a franchise sales representative for Valvoline, "because it gives our franchisees options, especially those franchisees who wish to grow and build more centers. Financing allows them to expand at the pace they want."
Valvoline's lease-financing program offers franchisees a 100-percent-financed leaseback program for land and building development, which can mean much lower upfront costs. "The average construction cost for a center is about $500,000, and most banks require at least 25 percent down, which would mean an investment of $125,000," Fry says. "The 100-percent financing eliminates that initial out-of-pocket expense."
Valvoline also offers a mortgage-based finance program for franchisees who wish to purchase rather than lease a station and land. This program is open to franchisees who've been operating a Valvoline center for at least 18 months, or who've been working in a similar quick-lube business as an independent operator for at least three years. It allows franchisees to get started with just 15 percent down, by offering loans that cover up to 85 percent of the cost of development of the center. Valvoline also offers lease programs for signs, computers and lube equipment.
Memphis, Tennessee-based Service-Master, fran-chisor of the AmeriSpec home-inspection service, Furniture Med-ic, Merry Maids, ServiceMaster Residential/Commercial Cleaning Services and TruGreen-ChemLawn concepts, has offered franchisees financing for 10 years.
Through its own financing company, ServiceMaster Acceptance Co. (SMAC), it lends qualified franchisees up to 70 percent of the franchise fee and equipment package.
The program allows franchisees to retain more working capital, says Bob Burdge, director of market expansion for residential and commercial services at ServiceMaster. "Of those franchisees who finance, 95 percent or more get a loan through SMAC," he says.
Other franchisors offer equipment financing on a more limited basis. Mail Boxes Etc., a San Diego-based postal and office-supply store franchisor, for example, offers up to 100-percent financing for as much as $30,000 in equipment. This program was started to free up money so franchisees would have more working capital, says Patti Durham, spokesperson for Mail Boxes Etc.