Franchising, Job Growth and Veterans

Jessica SarterFranchise Finance

Franchising

The recent issue of Entrepreneur Magazine features the 2014 list of the top 500 franchises. Franchising accounts for approximately 10% of new U.S. jobs according to an article in entrepreneur.com, with 11,000 new establishments in 2013. With sales of approximately $802 billion, representing 3.4% of U.S GDP, franchising is an important factor in the continuing economic recovery.

Despite the continued success and growth of franchising, lack of access to capital continues to have a negative impact on growth. According to an International Franchise Association (“IFA”) survey 68% of franchisors and 42% of franchisees reported that access to capital was impeding their ability to expand.

SBA’s new SOP 50 10 5 (F) contains new procedures to help small business lenders and by extension prospective borrowers determine whether the franchise is eligible for financing under SBA affiliation rules. In addition, by requiring all small business loans up to and including $350,000 to be pre-qualified with a minimum small business score, lenders and franchisors will be able to more efficiently pre-screen applicants and potential borrowers can gain greater confidence that they will get a loan.

According to a government report the U.S. military discharges approximately 160,000 active duty service members and 110,000 reservists annually and this number is expected to increase over the next five years as the size of the military is reduced. IFA’s VetFran program helps veterans become part of the franchise industry through training, financial assistance and industry support enabling thousands of veterans to become franchise owners. VetFran now has more than 580 participating franchise systems.