April 25, 2010

Franchise Failure Rates - Best and Worst


CNN Money just announced its top ten franchisees based on popularity as measured through the number of SBA loans over the past ten years. They also added another metric in the study by also calculating the default rate on these SBA loans to measure a failure rate. For the complete article you can click here.

Highlights of the top ten are:

1. Subway - Failure Rate 7%
2. Quiznos - Failure Rate 25%
3. UPS Store - Failure Rate 12%
4. Cold Stone Creamery - Failure Rate 31%
5. Dairy Queen - Failure Rate 8%
6. Dunkin Doughnuts - Failure Rate 8%
7. Super 8 Motels - Failure Rate 4%
8. Days Inn - Failure Rate 6%
9. Curves For Women - Failure Rate 16%
10. Matco Tools - Failure Rate 36%

Franchises are a great way for new business owners to start their own business and control their destiny. With a franchise you are given the playbook on operations, product/services offering, customer service, accounting; plus you have all the marketing support (usually the most difficult in starting a new business). Its like having an expert partner without giving up any equity.

When researching make sure you understand all the upfront and ongoing royalty costs. Yes they can be very expensive. As for Merchant Cash Advances, we are much more comfortable in extending credit to a franchisee due to all the benefits above. Also, a franchisee generally has much more invested in his business as compared to an independent business in the same space. This makes their commitment to the business and business model much stronger.

As a sales agent of MCA, don't forget to target these franchisees (especially those with low failure rates)! They are a great lead source and often yield repeat/referral business as once successful with one location a franchisee will open up several more locations (all require working capital to fuel their expansion).

April 17, 2010

Review Of ETA Show


This past week the Electronic Transaction Association (ETA) trade show was held for three days. This is the largest trade show in the US for the electronic payments industry. It offers a chance for the credit card processing industry to come together to learn about new products, services and technologies.


Of course the Merchant Cash Advance industry was well represented with four major funders sporting exhibit booths. It was great to see the MCA industry was alive and growing based on the displays.


Overall the show was well attended as compared to last year. The largest difference was the attitude and upbeat tone in 2010. Both exhibitors and attendees alike were talking about and planning on how to grow their businesses and invest in new technologies, products, etc to prepare for future growth. Gone was the talk of re-trenching, evaluating risk and pairing down to core products/services as in 2009. Many, including AFS, were inking new deals and or partnerships right on the trade show floor.


All were in agreement that the worst seems to behind us, but its still going to be a bumpy road for the immediate future and those of us that have survived are well poised for the long-term future.