In an exclusive interview with Gretchen Blake, VP of Business Development at IRH Capital, we look into the intricacies of franchise financing, gaining insights from Gretchen’s two decades of experience helping prospective and current Great Clips franchisees explore financing for operating a walk-in hair salon.
Gretchen, financing can feel intimidating and complex to a prospective franchisee. How exactly does franchise financing work?
Gretchen Blake: Imagine you want to open a franchise, like a Great Clips hair salon, and you want to explore how you would finance your investment. You come to us for funding. We assess your personal credit, financial statements, and liquidity. If you meet our criteria, we provide you with the necessary funds to establish and operate your franchise business. It's like a mortgage application but for a business.
What factors do you consider when evaluating potential franchisees?
Gretchen: We primarily look at three things: personal credit, personal taxes, and a personal financial statement. We want to ensure that franchisees have the financial stability to support themselves while their business is growing, especially during the initial start-up phase.
How has the franchise financing landscape changed recently?
Gretchen: While our credit criteria remain stable, the costs of construction and materials have risen significantly. Contractors are charging more due to various factors, including labor costs. However, focusing on a prime location and the strength of the franchise model can still be a winning strategy.
Franchisees considering Great Clips salon acquisitions may face a more challenging financing landscape as the higher interest rates reduce the amount of debt that can be supported by the cash flow, potentially influencing their financing decisions.
How does the location of a brick-and-mortar franchise brand impact financing?
Gretchen: Location is critical. A great location can overcome temporary financial challenges. With good real estate, you have a foundation to build on. That’s one of the reasons it’s great to work with a Real Estate team that has years of experience instead of trying to find a great location all on your own.
Could you share a success story involving Great Clips franchise financing?
Gretchen: Certainly. Great Clips has one of the best-performing portfolios we've worked with. In the 24 years we’ve worked with Great Clips franchisees, we've financed more than 3,000 salons with an incredible success rate. Even during challenging times like COVID-19, Great Clips' strong franchisees and supportive corporate approach helped maintain a solid track record.
Great Clips stands out due to its exceptional relationship with lenders. The corporate team maintains open communication and genuine care for franchisees. They've even reached out to us during tough times to ensure we're doing well. This level of engagement is rare in the franchise industry.
Is now a good time to invest in a franchise business, considering current challenges?
Gretchen: Yes, it's a good time to invest. While challenges exist, they're temporary. If you're eyeing a great location and have confidence in the franchise model, the long-term prospects outweigh short-term difficulties. Plus, the franchise landscape is always evolving, and new opportunities are constantly emerging.
Thank you, Gretchen, for sharing your expertise in franchise financing. IRH Capital is a valued vendor for Great Clips, and we’re thrilled to have such a dedicated partner when it comes to supporting our franchisees. If you’d like to connect with Gretchen to get more information about your specific situation, send me a note and I’ll put you in touch.
Give me a call, drop me an email—I’d love to talk to you about what it might look like to build a successful hair-salon franchise business.
Beth Nilssen
Director of Franchise Development | Great Clips, Inc.
800-947-1143 | [email protected]