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TALKBACK everyone’s talking about . . .


the banks T


he old adage states that banks are great at offering an umbrella when the sun is shining and taking it away


when the rain starts. And it seems that many operators are


fi nding this now: entrepreneurs keen to open an independent club, franchisees who want to open a second site... many in the industry are reporting that borrowing money is getting tougher. So is the economic climate to blame


for this, or is the reluctance to lend down to the banks’ perceptions of the fi tness industry? It’s well documented that the banks are currently tightening the purse strings generally, but the


jan spaticchia énergie • chief executive


suffering as banks are trying to de-risk. It’s a very different situation from five


“I


years ago, when we could get banks to fund 80 per cent of a project – now we don’t expect more than 50 per cent, and in some cases it’s as low as 30 per cent. Franchisees currently going for their


second site are finding it harder to borrow than before, even though they have proven themselves. Banks do consider franchises to be less risky propositions


on account of the fact that they have already been screened: 22 per cent of new businesses failed last year, but only 2.4 per cent of new franchise businesses. In spite of that, we are now seeing some franchisees partnering one another because they can’t get sufficient bank funding to go it alone. Banks are increasingly making use of the Enterprise


Guarantee Scheme, which means that the government will guarantee 75 per cent of the loan. However, banks do need to understand that it’s impossible to completely de-risk when you’re lending money and, in order to fuel the economy, they need to support entrepreneurs.


” 28


think the entire independent sector, including franchising, is


kath hudson • journalist • health club management


How do the banks perceive the health and fitness industry? It’s certainly harder to borrow money, but is this because they’ve fallen out of love with the sector or simply the impact of recession?


health and fi tness sector is weathering the recession better than other discretionary leisure sectors. Isn’t it therefore worthy of investment? The answer would seem to be yes,


but not universally: there are defi nitely business models that banks prefer at the moment, specifi cally low-cost and high- end. It’s the beleaguered mid-market clubs that are once again out of favour. The industry’s former reputation of


mis-selling contracts might have caused some suspicion in the banking world too. We have received feedback that credit card companies are holding onto card payments for three months, or even longer, causing cash fl ow problems.


The banks’ view on this is that they have to insure themselves against the cardholder potentially arguing that they were mis-sold to and making a claim on the card. However, Barclays Corporate head of hospitality and leisure, Mike Saul, questions the need for credit cards in clubs when memberships tend to be via direct debit anyway. Nevertheless, the sector faces a


challenge – so how will it respond? Will more clubs take the budget route? Will franchisees team up to raise funds? Will entrepreneurs wait to take the plunge? Will business plans become more creative generally? We ask our panel of experts...


HOW DO BANKS VIEW THE HEALTH AND FITNESS SECTOR? EMAIL US: HEALTHCLUB@LEISUREMEDIA.COM


mike saul barclays corporate • head of hospitality and leisure


sheet to lend. Our lending model hasn’t changed through the recession, but the market has got tighter and we are focused on quality, not quantity. Typically in a business lending


“W


application, we will want to know about the market, the consumer, the nature of


the income and cost lines of the business, as well as getting an understanding of the forecasts, the balance sheet and the detail of the cash flow. Finally, we want to know about management expertise and the operational running of the business. We heavily weight a business plan on the ability and track record of the management team and what they want to achieve, with the combination of short- and medium-term business plans. The discretionary nature of the health and fitness sector is an


issue. However, it has been less affected during the recession than, for example, casual dining and the cinema space. We believe opportunities lie in innovation: using social networking and technology. We are exploring innovations around loyalty schemes to incentivise secondary spend and are keen to hear from operators about ideas we can help them out with.


” Read Health Club Management online healthclubmanagement.co.uk/digital november/december 2011 © cybertrek 2011


e are in this market and there is a willingness and a balance


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