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Colombia
At the present, Colombia has the third largest number of franchises in South
America and is open to this kind of investment. It has several dangerous
disadvantages, however, which include a high poverty rate (40 percent), the
threat of guerilla and drug violence, and a small local market.
Western Europe
Franchising in Western Europe continues to grow at a steady rate. The United
Kingdom is a common entry point into Europe for many U.S. and Canadian
franchisors and has no pre-contract disclosure laws or really any specific
franchisee legislation whatsoever. Franchisee systems in France, Germany,
and Italy continue to flourish, both home-grown and foreign franchise sys-
tems. Spain is emerging as a powerful force in European franchising; the
number of franchisors operating in Spain has grown 150 percent over the
past five years. Statistics recently released by the Spanish Franchise Associa-
tion demonstrate that franchising sales now make up over 6 percent of total
retail sales and employ over 8 percent of the nation’s workforce. Franchising
in northern Europe has also grown at a slow but steady rate, particularly in
Denmark, Belgium, and Switzerland, whose early-stage homegrown fran-
chise systems are starting to expand into other parts of Europe and have their
long-term eye on the North American market.
Eastern Europe
Eastern Europe continues to navigate through challenging economic times
and has not been an attractive market for franchising in the past, but this may
be changing. The region’s economy is stabilizing, governments are gradually
lifting regulatory restrictions, disposable income is increasing, and the pub-
lic is attracted to Western goods. It is apparent that the region will at some
point be an excellent place for international franchisors, but the challenge is
deciding when to enter this market, particularly now, when competition is
limited. At the present, a barrier is that local entrepreneurs generally do not

Brands systems such as KFC and Pizza Hut as well as Subway and Baskin-
Robbins. Other types of franchise systems such as automotive care, home
services, and business services franchise systems may flourish as these econ-
omies stabilize.
Regional Trade Agreements
NAFTA
On January 1, 1994, the North American Free Trade Agreement (NAFTA)
among Canada, Mexico, and the United States began to take effect. NAFTA
mandates the eventual elimination of all tariff and nontariff barriers to trade
between Mexico and the United States over 15 years. Between 1993 and
1997, combined real U.S. manufactured exports to its NAFTA partners rose
by 40 percent, with 34 percent and 54 percent increases to Canada and Mex-
ico, respectively.
MERCOSUR
The MERCOSUR was created in March 1991 with the signing of the Treaty
of Asuncion. MERCOSUR is, since January 1, 1995, a Customs Union,
whereby the Member States (Argentina, Paraguay, Uruguay, and Brazil) have
eliminated all tariff and nontariff barriers to reciprocal trade and adopted a
common external tariff for third-party countries. In 1996, association agree-
ments were signed with Chile and Bolivia establishing free trade areas with
these countries on the basis of a ‘‘4 ם 1’’ formula. This regime is not, at
present, fully in effect. The Member States of MERCOSUR negotiated what
has come to be called an ‘‘Adaptation Regime,’’ by which some products
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traded among the four countries will, for a time, continue to pay duties. Lists
of exceptions to the common external tariff for a group of specific products
also exist. The Customs Union will be in full effect on January 1, 2006. MER-
COSUR as an international commitment is today something between NAFTA

Growing Franchisor
Owners and managers of growing franchisors have come to understand that
meaningful and effective business planning is critical to the long-term suc-
cess and viability of its underlying business and to its ability to raise capital.
Before you read about the various methods of financing available to the grow-
ing franchisor in Chapter 13, you must understand the key elements of a
business plan.
The Strategic Business Plan
Regardless of the financing method or the type of capital to be raised, virtu-
ally any lender, underwriter, venture capitalist, or private investor will
expect to be presented with a meaningful business plan. A well-prepared
business plan demonstrates the ability of the franchisor’s management team
to focus on long-term achievable goals, provides a guide to effectively imple-
ment the articulated goals once the capital has been committed, and consti-
tutes a yardstick by which actual performance can be evaluated.
Business plans should be used by newly formed franchisors as well as
established franchisors. The following is a broad outline of the fundamental
topics to be included in a typical franchisor’s business plan.
Executive Summary
This introductory section of the plan should explain the nature of the busi-
ness and highlight the important features and opportunities offered by an
investment in the company. The executive summary should be no longer
than one to three pages and include (1) the company’s history and perform-
ance to date, (2) distinguishing and unique features of the products and ser-
vices offered to both consumers and franchisees, (3) an overview of the
market, (4) a summary of the backgrounds of the leadership team, and (5) the
amount of money sought and for what specific purposes.
233
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234

when the franchise system is built?
2. Why has the company decided to expand its market share through franchising? What other alterna-
tives have been considered and why did the company select franchising?
3. What are the company’s greatest strengths and proprietary advantages with respect to its franchisees?
Consumers? Employees? Shareholders? Competitors?
4. What are the nature, current status, and future prospects in the franchisor’s industry?
5. Has an economic model and pro forma been built to demonstrate the viability of the franchise system
to both franchisor and franchisee?
6. Has the company selected its professional advisory system?
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❒ Describe the market. What is the approximate size of the total market for
the services offered by the franchisee? The approximate market for fran-
chisees?
❒ Describe the strategy. What marketing strategies and techniques have been
adopted to attract franchisees and consumers? Where do referrals for pro-
spective franchisees come from? Do existing franchisees make referrals?
Why or why not? (Include sample promotional materials as an exhibit.)
❒ Describe the performance of the typical franchisee. Are current stores
profitable? Why or why not? What factors influence their performance?
Rationale for Franchising
This section should explain the underlying rationale for selecting franchis-
ing in lieu of the other growth and distribution strategies that may be avail-
able. Discuss whether a dual distribution strategy will be pursued. Under
what circumstances will company-owned units be established? Explain to
the reader which method(s) of franchising will be selected: single units only?
sales representatives? area developers? subfranchisees? Special risks and
legal issues, which are triggered by the decision to franchise, should also be
discussed.

What portion of these fees collected from the franchisee will be net
profit? Discuss the amount of capital that will be required for the corporation
to meet its short-term goals and objectives. How much, if any, additional
capital will be required to meet long-term objectives? What alternative struc-
tures and methods are available for raising these funds? How will these funds
be allocated? Provide a breakdown of expenses for personnel, advertising
and marketing, acquisition of equipment or real estate, administration, pro-
fessional fees, and travel. To what extent are these expenses fixed and to
what extent will they vary depending on the actual growth of the company?
Operations and Management
Provide the current and projected organizational and management structure.
Identify each position by title with a description of duties and responsibili-
ties and compensation. Describe the current management team and antici-
pated hiring requirements over the next three to five years. What strategies
will be adopted to attract and retain qualified franchise professionals? Pro-
vide a description of the company’s external management team (attorney,
accountant, etc.).
Exhibits
Include exhibits in the presentation copies of the franchisor’s trademarks,
marketing brochures, and press coverage, as well as in sample franchise
agreements and area development agreements.
The Ongoing Strategic Planning Process
In a franchisor’s early stages, the emphasis is on the business plan—how do
we properly launch the franchising program to attract qualified candidates
and what resources will we need to sustain the program are all among the
key concerns. But what happens later? Once a franchisor reaches 50 to 100
units or more, the focus shifts away from mere business planning and on to
strategic planning. In the context of franchising, strategic planning is an on-
going process that seeks to build and improve the following key areas:
1. The quality and performance of the franchisees

be addressed are included in Figure 12-2. The strategic planning meetings
and retreats could be focused on a specific theme, such as brand building
and leveraging, rebuilding trust and value with the franchisees, litigation
prevention and compliance, international opportunities in the global village,
leadership and productivity issues, financial management and per-unit per-
formance issues, the improved recruitment of women and minorities, tech-
nology improvement and communications systems, alternative site and
nontraditional location analysis, co-branding and brand-extension licensing,
or building systems for improving internal communication. Any or all of
these topics are appropriate for one meeting or for discussion on a continuing
basis. The strategic planning meeting could be led by an outside facilitator,
such as an industry expert, or by the franchisor’s senior management team.
A model agenda for a general strategic planning retreat is set forth below.
Model Strategic Planning Meeting Agenda
I. Evaluating Our Strategic Assets and Relationships
1. Overview
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❒ Goals and objectives of the meeting
❒ Key trends in domestic and international franchising
2. Assessing the Strengths of Our Franchise Relations
❒ Franchising state of the union
❒ Common critical success factors by and among our franchisees
3. Evaluating Our Team
❒ Code of values–reality and practice
❒ Motivating and rewarding employees
❒ Protecting the knowledge worker
❒ Providing genuine leadership
4. Our Strategic Partners

5. Development of Branded Products and Services to Strengthen Reve-
nue Base
❒ Business training and assistance resources for clients
❒ Home cleaning and refinishing products
❒ Co-branded products and services (e.g., securities sales, financial
planning, home improvement and remodeling, etc.)
❒ Affinity/group purchasing programs
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BUSINESS AND STRATEGIC PLANNING FOR THE GROWING FRANCHISOR
The strategic planning process should develop, foster, and communicate a
series of good habits and best practices that the franchisor’s management
team follows as part of its daily, weekly, and monthly routine. Some of these
good habits are listed in Figure 12-3.
Figure 12-3. The seven habits of highly successful franchisors.
1. An ability to adapt to challenges and changes in the marketplace
• How do we react to inevitable and constant changes in the environment?
• How well do we plan in advance, anticipate change, and face the reality of what’s really happening
in the trenches?
• Do we really listen to our franchisees?
2. A genuine commitment to the success of each and every franchisee
• A chain is only as strong as its weakest link.
• How is this commitment demonstrated?
• Is this how our franchisees truly perceive our commitment?
3. A culture committed to overcoming complacency
• Are we committed to research and development?
• What steps are in place to constantly improve and expand our systems and capabilities?
• How quickly do we abandon a failing franchisee?
4. A team ready to break old paradigms
• Are we committed to thinking outside the box?

mented right away and some may take some time. Here is a list of specific
action items that may result:
1. Consider the entry into new domestic and international markets. You
can start with our neighbors to the North and South. Many of you as
franchisors are currently exploring opportunities in markets such as
Canada, Mexico, and South America due to the close geographic proxim-
ity to the United States.
2. Reexamine your vertical pricing structures and strategies in light of the
recent Supreme Court case, State Oil Co. v. Khan,* which changed the
ground rules for suggested retail pricing by applying a ‘‘rule of reason’’
test to vertical price restraints. The Supreme Court ruled that a manufac-
turer or supplier does not necessarily violate federal antitrust law by
placing a ceiling on the retail price a dealer can charge for its products.
It remains illegal, however, for manufacturers to impose minimum
prices on dealers.
3. Consider implementing various types of multi-unit development strate-
gies.
4. Consider alternative territorial penetration strategies such as kiosks, sat-
ellites, carts, mini-units, seasonal units, limited service units, in-store
units, resorts units, military base units, and related alternative site selec-
tion strategies.
5. Consider joint ventures with other franchisors or nonfranchisors and
complementary but noncompeting markets. This could include joint site
developments, such as in the coffee and muffin industries, or automobile
mini-malls and other related operational joint ventures. Many food-
related franchisors are actively developing co-branding programs as a
vehicle for growth and new market penetration.
6. Be aggressive and proactive in commercial leasing strategies. Consider
subleasing and turnkey development strategies, stricter site selection cri-
teria to improve failure rate, and the financial performance of each fran-

separate the good constructive criticism and proactive franchisee from
the just plain ‘‘whiners’’ whom you will never satisfy.
10. Build up your arsenal of protectable and registered intellectual property
(e.g., trademarks, copyrights, trade dress, etc.).
11. Be proactive in creating franchisee advisory councils and other methods
in improving franchisor/franchisee communications to maximize fran-
chise relationships. Bear in mind that happy franchisees keep litigation
costs down and new franchise sales up.
12. Search for new markets and methods to find new franchisees. Be creative
and untraditional. Try new venues and places where the other fran-
chisors are not targeting.
13. Venture into the world of being a product and service provider to your
network of franchisees. These activities should be subject to applicable
anti-trust laws. It could be quite lucrative, provided that you are within
legal boundaries, you are not too greedy, and properly structure the eco-
nomic relationships. These products and service provider relationships
can be done directly or through joint ventures with third-party suppliers.
New cases such as Queen City, 1997 WL 526213 (3d Cir. August 27,
1997), discussed in Chapter 4, may open up a new door for you in this
area.
14. Get active in industry groups and lobbying efforts that may affect the
operations or profitability of your franchisees’ businesses.
15. Use current and developing computer and communications technologies
to enhance franchise sales and support, to gather demographics, to pro-
vide training, and to facilitate communication by and among fran-
chisees. A franchisor’s failure to take advantage of these developments
along the information superhighway could be detrimental. These tech-
seven-week trial, the jury found the franchisor and other defendants (including three
corporate affiliates and three individual principals of the companies) liable to the class
of over 900 franchisees and awarded $197 million in compensatory damages. The judge

chise? You will be able to discover a lot about your UFOC and your abil-
ity to use the document as a marketing tool if you reread the document
as if you were buying the franchise.
20. Develop a good data-gathering system on the financial performance of
your franchisees. Use this data to compile sample profit and loss state-
ments and balance sheets of some of the strong, medium, and weak fran-
chisees in the system. Circulate these documents, subject of course to
confidentiality and earning claims regulations, among your existing fran-
chisees to increase their performance and to point out flaws in their fi-
nancial management.
In sum, the strategic planning process is a commitment to strive for the con-
tinuous improvement of the franchise system. The process is designed to
ensure that maximum value is being delivered, day in and day out, to the
franchisor’s executive team, employees, shareholders, vendors and suppli-
ers, and of course, its franchisees. It is about not being afraid to ask: Where
are we? Where do we want to be? What do we need to do to get there? What
is currently standing in our way of achieving these objectives? It is about
making sure that the company takes the time to develop a mission statement
and define a collective vision and then develops a series of plans to achieve
these goals. Executives must stay focused on these objectives and provide
leadership to both the balance of the franchisor’s team and to the franchisees
as to how these objectives will be achieved. The focus must be on brand
equity, franchisee value, customer loyalty, and shareholder profitability. The
guidelines and protocols for internal communications must encourage hon-
esty and openness, without fear of retaliation or politics.
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C
HAPTER
13
Capital Formation Strategies

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cause they will be unable to develop effective marketing programs, attract
qualified staff, or provide the high-quality ongoing support and assistance
that franchisees need to grow and prosper.
Bootstrap franchising has been tried by many companies, but very few
have been successful. In a bootstrap franchising program, the franchisor uses
the initial franchise fees paid by the franchisee as its capital for growth and
expansion. There is a bit of a catch-22, however, if the franchisor has not
properly developed its operations, training program, and materials prior to
the offer and sale of a franchise. Such a strategy could subject the franchisor
to claims of fraud and misrepresentation because the franchisee has good
reason to expect that the business format franchise is complete and not still
‘‘under construction.’’ A second legal problem with undercapitalization is
that many examiners in the registration states will either completely bar a
franchisor from offers and sales in their jurisdiction until the financial condi-
tion improves, or impose restrictive bonding and escrow provisions in order
to protect the fees paid by the franchisee. A third possible legal problem is
that if the franchisor is using the franchise offering circular to raise growth
capital, then the entire scheme could be viewed as a securities offering,
which triggers compliance with federal and state securities laws, as dis-
cussed in this chapter.
The start-up franchisor must initially put together a budget for the de-
velopmental costs of building the franchise system. This budget should be
incorporated into the business plan, the key elements of which are discussed
in Chapter 12. The start-up costs include the development of operations
manuals, training programs, sales and marketing materials, personnel re-
cruitment, accounting and legal fees, research and development, testing and
operation of the prototype unit, outside consulting fees, and travel costs for

❒ The type of media and marketing strategy selected to reach targeted
franchisees
❒ The number of company-owned units the franchisor plans to develop
❒ The length and complexity of the franchisor’s training program
❒ The rate at which the franchisor will be in a position to repay the capital
(or provide a return on investment), which will influence the cost of the
capital
Private Placements as a Capital Formation Strategy
Smaller and medium-sized franchisors often initially turn to the private capi-
tal markets to fuel their growth and expansion. The most common method
selected is the sale of a company’s (or its subsidiary) securities through a
private placement. In general terms, a private placement may be used as a
vehicle for capital formation any time a particular security or transaction is
exempt from federal registration requirements under the Securities Act of
1933 as described below. The private placement generally offers reduced
transactional and ongoing costs because of its exemption from many of the
extensive registration and reporting requirements imposed by federal and
state securities laws. The private placement usually also offers the ability to
structure a more complex and confidential transaction, since the offeree will
typically be a small number of sophisticated investors. In addition, a private
placement permits a more rapid penetration into the capital markets than
would a public offering of securities requiring registration with the Securi-
ties and Exchange Commission (SEC). In order to determine whether a pri-
vate placement is a sensible strategy for raising capital, it is imperative that
franchisors: (1) have a fundamental understanding of the federal and state
securities laws affecting private placements; (2) be familiar with the basic
procedural steps that must be taken before such an alternative is pursued;
and (3) have a team of qualified legal and accounting professionals who are
familiar with the securities laws to assist in the offering.
An Overview of Regulation D

ine applicable state laws very carefully because although many states
have adopted overall securities laws similar to Regulation D, many of
these laws do not include an exemption similar to 504 and as a result, a
formal memorandum (which is discussed later in this chapter) may need
to be prepared.
2. Rule 505 under Regulation D is selected over Rule 504 (by many compa-
nies) as a result of its requirements being consistent with many state secu-
rities laws. Rule 505 allows for the sale of up to $5,000,000 of the issuer’s
securities in a 12-month period to an unlimited number of ‘‘accredited
investors’’ and up to 35 nonaccredited investors (regardless of their net
worth, income, or sophistication). An ‘‘accredited investor’’ is any person
who qualifies for (and must fall within one of) one or more of the eight
categories set out in Rule 501(a) of Regulation D. Included in these catego-
ries are officers and directors of the franchisor who have ‘‘policymaking’’
functions as well as outside investors who meet certain income or net
worth criteria. Rule 505 has many of the same filing requirements and
restrictions imposed by Rule 504 (such as the need to file a Form D), in
addition to an absolute prohibition on advertising and general solicitation
for offerings and restrictions on which companies may be an issuer. Any
company that is subject to the ‘‘bad boy’’ provisions of Regulation A is
disqualified from being a 505 offeror and applies to persons who have
been subject to certain disciplinary, administrative, civil or criminal pro-
ceedings, or sanctions that involve the franchisor or its predecessors.
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CAPITAL FORMATION STRATEGIES
3. Rule 506 under Regulation D, although similar to Rule 505; however, the
issuer may sell its securities to an unlimited number of accredited inves-
tors and up to 35 nonaccredited investors. For those requiring large
amounts of capital, this exemption is the most attractive because it has no

A private offering under Regulation D also requires the preparation of certain
subscription documents. The two principal documents are the subscription
agreement and the offeree questionnaire. The subscription agreement repre-
sents the contractual obligation on the part of the investor to buy, and on the
part of the issuer to sell, the securities that are the subject of the offering.
The subscription agreement should also contain certain representations and
warranties by the investor that serve as evidence of the franchisor’s compli-
ance with the applicable federal and state securities laws exemptions. The
subscription agreement may also contain relevant disclosure issues address-
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FINANCIAL STRATEGIES
ing investment risks and may also contain operative clauses that will enable
the franchisor to execute documents and effect certain transactions after the
closing of the offering.
Offeree and Purchaser Questionnaires
Offeree questionnaires are developed in order to obtain certain information
from prospective offerees, which then serves as evidence of the required so-
phistication level and the ability to fend for themselves in a private offering.
Generally, questionnaires will contain personal information relating to the
prospective investor’s name, home and business address, telephone num-
bers, age, social security number, education, employment history, as well as
investment and business experience. The requested financial information
will include the prospective investor’s tax bracket, income, and net worth.
The offeror must exercise reasonable care and diligence in confirming the
truthfulness of the information provided in the questionnaire; however, the
offeree should be required to attest to the accuracy of the data provided.
Venture Capital as a Source of Growth Financing for the Franchisor
A rapidly growing franchisor should also strongly consider venture capital
as a source of equity financing when it needs additional capital to bring its

meet these investment criteria. There has been a definite shift away from
high-tech deals, which are largely dependent on a single patent or the com-
pletion of successful research and development, and toward investments in
more traditional industries, even if it results in less dynamic returns.
Negotiating and Structuring the Venture Capital Investment
Assuming that the franchisor’s business plan is favorably received by the
venture capitalist, the franchisor must then assemble a management team
that is capable of negotiating the transaction. The negotiation and structuring
of most venture capital transactions revolves around the need to strike a bal-
ance between the concerns of the founders of the franchisor, such as dilution
of ownership and loss of control, and the concerns of the venture capitalist,
such as return on investment and mitigating the risk of business failure. The
typical end result of these discussions is a Term Sheet, which sets forth the
key financial and legal terms of the transaction, which will then serve as a
basis for the negotiation and preparation of the definitive legal documenta-
tion. Franchisors should ensure that legal counsel is familiar with the many
traps and restrictions that are typically found in venture capital financing
documents. The Term Sheet may also contain certain rights and obligations
of the parties. These may include an obligation to maintain an agreed valua-
tion of the franchisor, an obligation to be responsible for certain costs and
expenses in the event the proposed transaction does not take place, or an
obligation to secure commitments for financing from additional sources prior
to closing. Often these obligations will also be included as part of the ‘‘condi-
tions precedent’’ section of the formal Investment Agreement.
Negotiation regarding the structure of the transaction between the fran-
chisor and the venture capitalist will usually center on the types of securities
to be used and the principal terms, conditions, and benefits offered by the
securities. The type of securities ultimately selected and the structure of the
transaction will usually fall within one of the following categories:
❒ Preferred Stock. This is the most typical form of security issued in connec-

case if only convertible debt was used in the financing.
❒ Common Stock. Venture capitalists will rarely prefer to purchase common
stock from the franchisor, especially at early stages of development. This
is because ‘‘straight’’ common stock offers the investor no special rights or
preferences, no fixed return on investment, no special ability to exercise
control over management, and no liquidity to protect against downside
risks. One of the few times that common stock might be selected is when
the franchisor wishes to preserve its Subchapter S status under the Inter-
nal Revenue Code, which would be jeopardized if a class of preferred
stock were to be authorized.
Once the type of security is selected by the franchisor and the venture capi-
talist, steps must be taken to ensure that the authorization and issuance of
the security is properly effectuated under applicable state corporate laws.
For example, if the franchisor’s charter does not provide for a class of pre-
ferred stock, then articles of amendment must be prepared, approved by the
board of directors and shareholders, and filed with the appropriate state cor-
poration authorities. These articles of amendment will be the focus of negoti-
ation between the franchisor and the venture capitalist in terms of voting
rights, dividend rates and preferences, mandatory redemption provisions,
anti-dilution protection (ratchet clauses), and related special rights and fea-
tures. If debentures are selected, then negotiations will typically focus on
term, interest rate and payment schedule, conversion rights and rates, extent
of subordination, remedies for default, acceleration and pre-payment rights,
and underlying security for the instrument, as well as the terms and condi-
tions of any warrants that are granted along with the debentures. The legal
documents involved in a venture capital financing must reflect the end result
of the negotiation process between the franchisor and the venture capitalist.
These documents will contain all of the legal rights and obligations of the
parties, striking a balance between the needs and concerns of the franchisor,
as well as the investment objectives and necessary controls of the venture

the affairs of their company in exchange for the higher level of risk inherent
in taking on additional debt obligations. The ability to meet debt-service pay-
ments must be carefully considered in the franchisor’s financial projections.
If a pro forma analysis reveals that the ability to meet debt-service obli-
gations will put a strain on the franchisor’s cash flow, or that insufficient
collateral is available (as is often the case for early-stage franchisors who lack
significant tangible assets), then equity alternatives should be explored. It is
simply not worth driving the franchisor into voluntary or involuntary bank-
ruptcy solely to maintain a maximum level of control. Overleveraged fran-
chisors typically spend so much of their cash servicing the debt that capital
is unavailable to develop new programs and provide support to the fran-
chisees, which will trigger the decline and deterioration of the franchise sys-
tem. In addition, the level of debt financing selected by the franchisor should
be compared against key business ratios in its particular industry, such as
those published by Robert Morris Associates or Dun & Bradstreet. Once the
optimum debt to equity ratio is determined, owners and managers should be
aware of the various sources of debt financing as well as the business and
legal issues involved in borrowing funds from a commercial lender.
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Sources of Debt Financing
Although most franchisors turn to traditional forms of financing such as term
loans and operating lines of credit from commercial banks, there exists a
wide variety of alternative sources of debt financing. Some of these alterna-
tives include:
❒ Trade Credit. The use of credit with key suppliers is often a practical
means of survival for rapidly growing corporate franchisors. When a fran-
chisor has established a good credit rating with its suppliers but as a result
of rapid growth tends to require resources faster than it is able to pay for

tively considered, traditional bank loans from commercial lenders are the
most common source of capital for franchisors. Franchisors should take the
time to learn the lending policies of the institution, as well as the terms and
conditions of the traditional types of loans such as term loans, operating
lines of credit, real estate loans, and long-term financing.
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