Why knowing your franchisees’ banks matters

In the world of franchising, where success often hinges on meticulous planning and strategic decision-making, knowing who your franchisees bank with, can be a game-changer

Why knowing your franchisees' banks matters

It might not seem like the first piece of the puzzle, but in the grand scheme of things, it’s a crucial element that can make or break your business. So, why does it matter so much?

The financial backbone of franchising

Imagine your franchise system as a well-constructed house. Your franchisees are the bricks, and you, as the franchisor, are the mortar that holds it all together. What’s the foundation of this house? It’s the financial stability of your franchisees.

When you know which banks your franchisees are partnered with, you gain valuable insights into their financial health. Are they all with banks who understand the unique needs of franchise businesses? Are they getting the financial support they need to thrive? Is this support available from all banks? These questions might seem insignificant, but they can have a profound impact on your franchise network’s overall success.

Tailoring your support

Every bank has its strengths and weaknesses, just like every franchisee has unique financial requirements. By knowing your franchisees’ banking choices, you can understand the view that each bank has of your Brand and you can tailor your support and guidance to match their specific needs.

For instance, if a majority share of your franchisees bank with a particular institution, you can work closely with your network accountant to develop financial strategies that align seamlessly with that bank’s services. This can include optimising cash flow, tax planning, and financial reporting, all with the aim of maximizing ROI and ensuring your franchisees are on solid financial ground.

Franchise-friendly funding

Understanding your franchisees’ banking choices can actually have a significant impact on their ability to secure funding for their franchise business. Some banks have a track record of being more favourable towards certain franchise businesses. This can apply by sector and by Brand. They may offer specialised franchise financing programs or have experience working with franchisors. If you know which banks have the best service and products for your Franchise, you can guide them towards the financial institutions that are going to provide the best combination of services and products. Ensuring only franchise friendly banks are selected and this has beneficial impact on any of your franchisees when they are seeking funding. Both new starters and existing businesses alike.

Each bank may have its own lending criteria, interest rates, and terms for business loans that are specific to your franchise and they will undoubtably differ across the banks and across the different products the banks offer. For example, a bank may have a lower-level lending policy on the Recovery Loan Scheme (RLS) as opposed to a standard “secured” loan. Leaving aside the ethics of whether this is acceptable practice from the banks, given the RLS is designed to level the playing field, it is clearly important to know what experience banks have of your Brand.

By knowing your franchisees banking choices, you can work with your franchise network accountant to understand how each bank will view your Brand.

You can develop financial strategies that align with the requirements of those banks, particularly if any one bank has a significant proportion of your network. This can potentially improve your franchisees eligibility and make their loan applications more attractive to any one, or all, lenders.

Building trust and confidence

In the world of franchising, trust is a currency that can’t be underestimated. When you show your franchisees that you’re attuned to their financial concerns and are willing to support them in a way that resonates with their banking choices, you’re building trust and confidence in your network.

This trust goes both ways with your relationship with banks. Consider the, thankfully, rare situation of a Franchisee who is struggling financially. You will pick this up through Key Performance Indicators and sales reports and your Franchisee fee receipts. You will know which bank may need to offer increased support to your franchisee, whilst you build a robust recovery plan and you can be part of the conversation and add a broader and larger, Franchisor level, dialogue to the discussions.

Furthermore, by partnering with a firm of regulated and independent franchise network accountants, you demonstrate your commitment to your franchisees’ success by having composite information showing the more general health of your network. It’s a win-win situation – your franchisees feel valued and supported, the banks know you are an active participant in their customers financial well-being and you enjoy a stronger, more financially secure network.

The advantage

Your chosen network accountant fits into this equation as your financial ally in this journey. With their expertise, they can be the cohesion between all your franchisees’ banking and financial choices and your franchising goals, as well as providing valuable insights, helping you understand how to align your financial strategies with the services offered by your franchisees’ banks. This can include optimising tax planning, streamlining financial processes, and ensuring compliance with the banking institution’s requirements.

So, to summarise, knowing who your franchisees bank with might seem like a minor detail, but it’s one that can significantly impact your franchise’s success. It’s about tailoring your support, building trust, and ultimately ensuring the financial well-being of your network.

With d&t Chartered Accountants by your side, you can navigate the financial landscape of franchising with confidence, ensuring that your franchisees’ banking choices become a catalyst for growth and prosperity. After all, in the world of franchising, success is all about making the right connections – both in terms of banking and business support.

Phil Archer
Phil Archer