Franchise Q&A Ask the experts
A: Obtaining quotes from a number of fi nance providers is something we all do to compare what funding options are available to us. But are we really comparing apples with apples? Three companies quote a prospective client a loan with interest charged at a rate of eight per cent. Surely the client can proceed with any one of the companies, as they will all cost the same, won’t they? They may well do but beware – they could be very diff erent! How, though, can this be when they are all quoting eight per cent? Lenders and fi nancial institutions, quite
Paul Hansen
Head of sales and marketing at Franchise Finance
Q: How much attention should I pay to different interest rates on loans?
rightly, spend millions of pounds every year promoting the most attractive interest rates to win new clients. There are, however, many diff erent types of interest rates quoted by lenders: fl at rates, APRs, nominal, inherent and implicit to name a few. A loan quoted at eight per cent could generate a very diff erent repayment profi le depending
on which type of interest rate it refers to. Take a typical fi ve-year loan for £30,000, payable monthly in arrears. Using a fl at rate of eight per cent you would pay a total of £12,000 of interest and the repayment would be £700 a month.
The same deal quoted using an implicit rate of eight per cent would generate a monthly repayment of £608.29 and the total interest charge would be £6,497.71, a saving of over £5,500. Clearly, they are very diff erent.
Don’t always be attracted to just the cheapest headline interest rate and ensure you understand exactly what the total repayment amount would be to ensure you are achieving the very best deal for your business. If you have any questions or are
unsure about interest rates speak to your accountant or feel free to contact one of the team at Franchise Finance.
A: In the early stages of the decision to buy a franchise, you will want to create a shortlist of opportunities for yourself. How do you compare them and what are the important facts to establish? A good place to start is to ascertain how long the franchise has been operating and to fi nd out more about their experience and position within the industry in which they operate. Getting to know the directors and managers and their background is a good idea, as this will help you decide if you have a similar skillset and whether you will be the right fi t to take this franchise forward in your chosen territory. You are entering into an important partnership so getting to know
the people behind the franchise is also important in deciding whether you could work closely with them going forward. Another important question to ask the franchisor is how much demand exists for their products and services. This will help you gauge whether you are buying a franchise that will secure your future for many years to come. A Jackson Fire & Security franchise, for instance, provides businesses with a legal requirement: to ensure their premises are fi re safety compliant. This is important to emphasise to anyone considering our franchise opportunity as we have demand backed up by legislation and repeat revenue streams.
Rachel Evans
Marketing manager at Jackson Fire & Security
Q: What are the important facts to fi nd out when assessing a franchise opportunity?
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BusinessFranchise.com | April 2018
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