Financing Alternatives for International Franchising Martin Francis Senior Manager Global & Corporate Franchising HSBC Bank Nathalie Dubiez Head of Franchising HSBC France

HSBC Group Committed to international business with 10k offices in 83 countries and territories including commercial banking in 55+ countries Developing franchise finance internationally

HSBC Group Dedicated franchise specialists Franchise profiles Local introductions International co-ordination from UK with 20+ years’ experience International banking services, e.g. centres to facilitate account-opening, cash management

Financing of Franchising How banks view franchising Franchising into a country - how banks can help When to raise financing with bank Options for franchise finance overseas How franchisors can help their franchisees Summary

How banks view franchising Improved risk/return compared with equivalent non-franchise operations –lower failure rate –proven market for goods/services –tried and tested systems –ongoing support and training Wide range of industries in a significant and growing business segment

How banks view franchising Opportunity to develop relationship with –franchisor –franchisor’s overseas operations/partners –sub-franchisees Major banks have franchise specialists

How banks can help Franchise Specialists - franchise unit Maintains relationships with: –franchisors, franchise professionals, franchise industry association, e.g. British Franchise Association, whose awards HSBC sponsors Handles PR, marketing, exhibitions, seminars, training, market intelligence

How banks can help Franchise Specialists - franchise unit Guidance about franchising - website/guides Tailored packages for franchisees with lending up to 70% of start-up/working capital needs for established names Internationally-oriented banks can assist franchisors taking concept overseas

When to raise financing with bank Consult bank at early stage Bank will want to assess franchise viability Importance of professional advice Pilot operation seen as vital to prove concept in a new country, however well established overseas

Options for franchise finance overseas Bank will consider: Franchisor’s business concept : –local customer proposition/financial model Franchisor’s international strategy Franchisor’s track record overseas Resources available - management and financial

Options for franchise finance overseas Bank will consider structure: direct JV area developer master franchise

Options for franchise finance overseas Master franchisee Equity/debt split Venture capital/equity finance –Business Angels/Regional Development Agencies Full range of business lending products

Options for franchise finance overseas Franchisees Full range of business lending products Franchise-specific arrangements efficient 50%-70% of start-up costs/working capital Costs - interest and fees take into account the risk evaluation (including stake/security)

Options for franchise finance overseas Franchisees Loan –term tied in with franchise agreement –flexible capital repayments possible Working capital facility Factoring/Leasing/Vehicle finance Money transmission Security/collateral –support from Govt bodies e.g. SFLG/SOFARIS

How you can help your franchisees What do banks look for from franchisors? Franchisor’s financial information and strategy/business plan Franchisee selection criteria/training/support Existing franchisees’ performance Terms of franchise agreement –upfront and ongoing fees/performance conditions/term

How you can help your franchisees What do banks look for from franchisees? Background to franchisee Business plan - how will franchise succeed in local environment? Franchisee’s ‘survival budget’, including a breakeven analysis within realistic profit and cash flow projections Security/collateral

How you can help your franchisees Other considerations Language Ways of doing business Legal differences Real estate issues Staffing Supply chain

Summary Franchising is a key part of commercial activity in many countries Good market for banks to source new business Talk to the banks at an early stage and help bank to understand how your concept will operate

abc Martin Francis, Senior Manager Global & Corporate Franchising HSBC Bank plc, Level 32 London E14 5HQ +44 (0) abc Nathalie Dubiez, Responsable March é de la Franchise HSBC France, PARIS cedex 08 Tel: + 33 (0)