Uncommon Currency You really, really want a franchise. But you just don't have the money to buy one. Where can you turn? We hear franchisors have some tricks up their sleeves.

Stanley Wong enjoyed taking his family to the International House of Pancakes. So when he began pondering his business future, Wong wondered whether the family restaurant chain could provide the opportunity he was looking for.

The bad news: At the time, Wong was a 28-year-old self-employed grocer without any substantial savings, so the possibility of buying a franchise seemed pretty hopeless. The good news: IHOP had put together a special financing program for its franchisees, which included building and equipping the restaurant, then leasing the restaurant and equipment to the franchisee.

"Everybody comes to America with a dream of being a success," says Wong. But that American Dream comes with a price. For those who may equate success with buying a franchise, the start-up costs and franchise fees can be prohibitive. But a growing number of franchises are offering innovative financing programs that help their prospective franchisees' dreams become reality.

For example, when Wong opened the first IHOP franchise in San Francisco in 1967, the franchise fee was $40,000. It wasn't a problem that he had only $10,000 to invest--IHOP's finance program allowed him to finance the rest of the fee over an eight-year period. "That really helped us out," says Wong, "because we didn't have a lot of money and were finding it very difficult to get financing [elsewhere]."

Today IHOP finances 80 percent of the franchisee's franchise fee as well as 100 percent of the leases on the building and equipment. The goal? To give more people the opportunity to own a business. "We're looking for people who are willing to work hard and are capable of being a good restaurant operator," says Alan Unger, the franchise's CFO. "We're not looking for people with previous significant restaurant success who can afford to build, develop and finance restaurants on their own."

Wong certainly fit that bill. With financial backing from his franchisor and after the success of his first IHOP, he eventually opened 22 more restaurants in California, Idaho and Utah.

Though Wong's balance sheet is certainly more impressive today than it was 30 years ago, and he now has the capability of being funded by any number of lenders, he continues to get his financing through IHOP. "I've had more of a relationship with them over the years," Wong explains. "They have integrity--that's one of the big reasons why I'm still with IHOP."

Earning Points

Like IHOP, Fastframe is seeking experience rather than financial strength in its prospective franchisees. This franchise differs, however, in that it gives its corporate and franchise employees the ability to work toward, rather than invest in, a store of their own. With a goal of keeping talented framers and designers in its system, Fastframe instituted its managing partner program in 1998, allowing corporate and franchise employees to earn shares in their stores.

The program is based on "the fact that there are a lot of good people in this industry, both designers and framers, and quite honestly there's not a great career ladder for them," explains Brian J. Harper, Fastframe's president and CEO. "We want to give them a [true] career opportunity."

Greg Fournier was an ideal candidate. Working as an employee of an Orange, California, Fastframe store for six years, Fournier became increasingly frustrated as his employer seemed to lose interest in the business. "I saw the potential of this store . . . and the lack of what [my boss] put into it. Everything I tried to do wasn't enough, because I wasn't the decision-maker," says Fournier, 30.

Fournier explained his situation to Fastframe, which informed him about the managing partner program. He put in a small sum of money to buy the store, and the franchise put up the rest. Fournier was given certain sales goals that, when achieved, would earn him an additional percentage of the business. He's currently earned 40 percent of the business from Fastframe and has become managing partner of a second store in Yorba Linda, California.

Without the managing partner program, Fournier is unsure where he'd be today. He agrees with Harper's sentiments, though, that he probably would have quit working at Fastframe. "I might have moved to a larger company where I could have overseen more people, but I wouldn't have been happy. I always wanted to own my own [business]," he says. "That's why this is such a great program. It's ideal if you lack the funds to [buy a franchise], but you have the knowledge and the ambition to do it."

A New Focus

When Allied Domecq QSR-the franchisor of Baskin-Robbins, Dunkin' Donuts and Togo's-created its financing program, the company was more interested in making the financing process easier for all franchisees than in targeting a specific group. The company selected three lenders from a group it had informal relationships with and created a preferred lender program. Through the program, the three preferred lenders-New York City-based CIT Group Inc., Washington, DC-based National Cooperative Bank, and Danbury, Connecticut-based QuesTech Financial LLC-have a shorter, customized loan application for Allied Domecq franchisees.

"Based on our experience and feedback from our franchisees, we thought by focusing on a select few preferred lenders who wanted our brands to be a core focus of their business, we could provide a more consistent source of funds, a higher level of customer service and competitive interest rates," explains Adrien Deberghes, assistant treasurer for the franchisor.

Carlos Teixeira is one franchisee of Allied Domecq who has benefited from the preferred lender program. A franchisee since 1986, Teixeira owns eight Dunkin' Donuts franchises in New York. "[The preferred lender program] specifically benefited me, because QuesTech's offering was tailored [to Dunkin' Donuts]. They knew and understood the business," the 45-year-old franchisee says.

Such programs have opened doors for franchisees who otherwise may not have been able to afford a franchise or qualify for financing. But as with most franchisors offering financing programs, Allied Domecq isn't content to gloat over prior accomplishments-they're always interested in improving their offering. "Considering how dynamic the industry and the capital markets are, we're constantly looking at whether [the program] is as effective as it can be," Deberghes says. "We're happy with what it's doing now, but it can always be better."

Contact Sources

• Allied Domecq QSR
  (781) 961-4020, www.dunkin-baskin-togos.com
• Fastframe USA Inc.
  (888) TO-FRAME,www.fastframe.com
• IHOP Corp.
  (818) 240-6055, www.ihop.com