Franchise leaders discuss credit, social networking during Dallas roundtable.

The stormy skies in Dallas May 14 did not damper the enthusiasm of the franchise leaders who attended the latest in the series of CEO Roundtables being hosted by the International Franchise Association. Seventeen area franchise leaders braved the spring storms to gather at the Jani-King International, Inc. headquarters to listen, learn and share best practices during these challenging economic times.

Despite the recession, many franchise companies are finding success during the recession, but many are facing slower sales and financing difficulties similar to many leaders across the country. IFA launched the listening tour in April to hear from its members how the association could enhance efforts to support the industry during the recession. Sessions have been conducted in Philadelphia, Denver, Orange Co., Calif. and Chicago and others are planned for Atlanta, and Minneapolis. Each session is hosted and moderated by members of the IFA leadership.

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"These events are designed to hear firsthand how members are faring during the recession and how IFA can further support their efforts," said IFA Chairwoman Dina Dwyer-Owens, CFE, who leads the Dwyer Group's multiple franchises and moderator of the Dallas event. "The interaction and networking has been invaluable as our industry addresses the many challenges facing our economy."

Jani-King International, Inc. Pres. Jerry Crawford, CFE, who hosted the group, said that bringing together local franchise business leaders in cities around the country strengthens all businesses by sharing best practices both in good times and in bad.

"Franchise businesses account for 1.6 million jobs in Texas and provide $176 million in economic output," Crawford said. "By gathering at sessions such as the CEO Roundtables, we can help strengthen the economic output and work together to address issues impacting our collective businesses."

Responding to the Credit Crisis

As with other roundtable discussions, the primary concern among Dallas attendees was the ongoing impact of the credit crisis. IFA staff presented the highlights of a recent association credit lending report, which shows that for every $1 million of lending obtained by franchise small businesses, 34 jobs are created and $3.6 million in annual economic output is realized.

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The study, Small Business Lending Matrix and Analysis, prepared by FRANdata Corp. for the IFA Educational Foundation, shows the relationship between lending to the franchising industry and the industry's capacity to develop new businesses and expand existing businesses. Because of current conditions, the study predicts a 40 percent reduction in franchise lending in 2009. This reduction will result in the loss of nearly 50,000 jobs and over $5 billion in economic activity.

Frustrated by the lack of financing available for new franchise sales and the threat of lines of credit diminishing, the attendees outlined how they are focusing on basic unit economics to help existing franchisees and identified actions that could be taken to help free capital for expansions. For instance, the group supported the idea that if the U.S. Small Business Administration increased the prime rate, loans may be more accessible.

"The IFA Economic Recovery Plan has identified many ways to help break the logjam we are seeing in the credit market," said Dwyer Owens. "We have specifically identified ways to improve the Small Business Administration's loan program so that more capital will be available. We have presented these ideas to Congress and the administration and we are hopeful we will see action very soon."

IFA's Economic Recovery Plan for improvement in the SBA to help loosen credit includes increasing the SBA 7 (a) maximum loan limit from $2 million to $3 million and the maximum loan guarantee from $1.5 million to $2.7 million so that the small businesses that can create the most jobs can participate in the program; allowing pricing of SBA loans to be competitive with other forms of capital investment; (current SBA rate caps do not reflect real-world credit risk spreads and discourage bank lending); reversing the new SBA policy on "goodwill" financing of business acquisitions; and promoting reasonable audit standards so that banks have certainty that loan guarantees will be honored.

Dwyer-Owens said that IFA members could help get these messages to Congress by calling their representatives and senators and urge them to do more. "If we can leverage the franchising industry's strength in numbers, we can make a real difference during these challenging times."

Social Networking 

The Dallas attendees also discussed the use of social media which is quickly becoming an important marketing tool. Many franchise leaders are keeping costs down by utilizing more social-networking sites to reach targeted audiences about their businesses.

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Many are using the popular sites Twitter.com, LinkedIn.com and Facebook.com to share information and update interested parties on their businesses. For instance, Jan Van Blarcum, founder and CEO of Creative Tutors 4 Kids International in Piano, is targeting former teachers, education experts and even mothers through Twitter and Facebook, creating original cartoon characters to be the company's face on these networks. Cynthia Gartman, CFE, of Country Place Living, LLC is also using social networks and has leveraged contacts made through the networks to sell franchises.

While many franchise businesses are only beginning to adopt these new communication channels, the roundtable provided an opportunity to demonstrate the diversity and scope of these new marketing tools.

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Roundtable "Take Aways"

* Target small community banks and credit unions as alternative lenders.

* Search for non-traditional sources of financing such as business loans and grants from the U.S. Department of Agriculture Rural Development program.

* Find ways to develop personal relationships with bankers to familiarize them with your business model and enable them to be better able to make judgments when adjustments may be considered.

* Communicate aggressively with your franchisees. It's back to basics during these challenging times.

* Consider using blogs to get your message out to potential investors and help educate the public about your company and business approach.

* If you using social-networking sites, put the address on your business cards and e-mail signatures to increase your reach.

* Get involved politically. Get to know your local representatives so they will better understand how laws affect your business. Supporting information is available at www.franchise.org for tools to use in contacting members of Congress.

Attendees

Dina Dwyer Owens, CFE

Chairwoman & CEO

The Dwyer Group

Jerry Crawford, CFE

President

Jani-King International, Inc.

Ugo Ginatta

President & CEO

Paciugo

Dana Oliver

President

Adventure Kids Playcare

Michael Brown 

Chief Executive Officer

Children's Lighthouse 

Robert Bloom

President and CEO

ColorTyme, Inc.

Cynthia Gartman, CFE

President & COO 

Country Place Living, LLC

Jan Van Blarcum

Founder & CEO

Creative Tutors 4 Kids

International, Inc.

Susan Last, CFE

COO

FASTSIGNS

International, Inc.

Alisa Harrison

Vice President of Communications & Marketing

International Franchise Association

Cassie Barnes

Interstate Battery

Franchising & Development, Inc.

Steve Berkmen, CFE

President of Franchising

Paciugo

Matt Boswell

Founder & CEO

Pet Butler

J.J. Sorrenti

President

Safeguard Franchise

Systems, Inc.

John Carney 

CEO

Winzer Corporation

Alisa Harrison is vice president, communications and marketing far the International Franchise Association. She can be reached at 202-662-0775 or [e-mail].