Franchise Players: The Challenges of Finding Funding
Franchise Players is Entrepreneur’s Q&A interview column that puts the spotlight on franchisees. In celebration of Memorial Day, we're running a series celebrating veterans in franchising. If you're a franchisee with advice and tips to share, email email@example.com.
Steve Grimes learned all the skills he needed to be a successful franchisee in the military: leadership training, positive attitude and intense work ethic. However, when he returned to the U.S. after a year-long tour of duty in Afghanistan and opened an Honest-1 franchise, Grimes faced an unexpected challenge: finding funding. Here's how he found the perfect bank for his needs as an auto franchisee.
Name: Steve Grimes
Franchise owned: Six in the Portland, Ore. market
How long have you owned the franchise?
First one purchased in September 2007
I had come from several large organizations in corporate America, and being a member of the military, I was used to having a higher headquarters. I enjoy being part of something larger than myself. The training and support is great too!
What were you doing before you became a franchise owner?
I was previously in Afghanistan for a year with the Oregon Army National Guard. Before that I worked for Firestone for 15 years as a store manager. I had applied at Firestone to be a district manager but never was selected. I am now building my own Honest-1 district and am my own district manager.
Why did you choose this particular franchise?
I liked the concept, and the fact that it was small and did not have a big corporate feel. Where else can I make a call and talk to the CEO or COO? It has a nice interior that appealed to my wife. It was a great opportunity for me at the time. It has one of the lowest franchise fees and royalties to pay.
How did your experience in the military prepare you for franchise ownership?
I was Company Commander of the largest unit in the State of Oregon. The Brigade Commander, a Brigadier General, and his staff were part of my unit too. I was responsible and accountable for over a million dollars worth of equipment, vehicles and weapons. That job took a lot of skill and understanding of working together for positive results. The leadership training, the positive attitude and taking on the hardest missions helped prepare me for being a small business owner.
How much would you estimate you spent before you were officially open for business?
We just opened our 6th location on May 12, 2014 in Vancouver, WA. I have a breakdown of $225,000 to get a store up and running, including putting $30,000 in the bank for working capital. I personally spent money on a contractor doing tenant improvements-$52,000, computer installed-$7,000, signage-$12,000, and shop equipment of $20,000. I will get money from the landlord to cover some of the build out- $40,000 and a bank loan of $200,000 to finish my build out.
Where did you get most of your advice/do most of your research?
For automotive, I got information from the Honest-1 conferences and emails throughout the year. I do go to other industry events, such as NACE/CARS. I also get great ideas from Ratchet and Wrench magazine.
What were the most unexpected challenges of opening your franchise?
That it would be so difficult to get a loan from the bank, initially. It is funny, when you need money, the banks don't want to lend it. And when you don't need it, you get offers all the time. The Bank of the West has been great for the small business owner. My biggest regret is that I didn't leave Firestone 5 years sooner and open my first franchise sooner.
What advice do you have for individuals who want to own their own franchise?
Nail down the financing first. Go through the SBA loan process, or whatever means you are going to use to fund your purchase, conventional loan, Line of Credit, retirement account rollover, credit cards to bridge or your own money if you are independently wealthy. Then identify a suitable location that will get you the best return on your investment. I typically try not to use a broker, so I can use their commission for free rent and tenant improvement money. Have several locations you would consider, and negotiate the best lease you can. Do your homework as far as demographics and completion in your market, to make sure you are setting yourself up for success. And ask for the world, you just might get it.
What advice do you have for other veterans who want to own their own franchise?
Don't wait another day to get started. There is never the perfect scenario. It is not for everyone, and not everyone can be a small business owner. Find out if meet the requirements of the franchisor and proceed with your dream. And if you have one location, don't wait until it is perfect before making a decision on expanding further. If a location is cash flowing and turning a profit, expanding may help you reach your goals quicker than you think.
What’s next for you and your business?
In the next few years, we are looking to open two more locations in the Oregon/Vancouver market. Eight might me enough. For me it's all about opportunity. If there are good locations available, if I can secure financing, and if there are great people available needing jobs in the work force, I plan to continue putting Americans to work!
Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor.