Australian Franchise News – 14-03-12
While the Big Four Australian banks tighten their lending credit and threaten to potentially increase rates in light of the Reserve Bank’s instructions to hold them static, Snap-on Tools Australia has been monitoring the success of their private funding offering for potential franchisees.
Following in the footsteps of their international parent company, the Snap-on Tools Australia Credit Program was softly launched in mid 2011. Snap-on believes the Program represents the beginning of a trend in successful multinational retail operations cutting out traditional lenders in the franchise market. To date more than ten new franchisees have taken up the offer, representing a third of the business’ yearly franchisee intake.
“We are witnessing a changing economic paradigm in retail, and particularly in franchising internationally,” said Nick Hudson, National Franchise Manager for Snap-on Tools. “Throughout the world there is pressure on the retail model – from a softening in demand for product, right through to a restriction on lending for people interested in investing in a franchise. We decided to circumvent this, and inject much needed funding into the system ourselves.
“We believe this is an important tactic in helping ward off the colder economic climate from Europe and the Americas affecting us here in Australia.”
Entry prices in Australia for many household name franchises are extremely high – ranging from $200,000 right through to $1million – meaning that a potential franchisee naturally looks to a lender to assist them in making the investment. Snap-on Tools Australia recognised that although their franchise investment is at the lower end of the scale securing access to funds was a significant barrier to many who genuinely wished to become part of the franchise network.
With more customers in Australia than they can currently service, and solid territories existing that simply needed a franchisee to service waiting customers, Snap-on Australia considered the creation of the Credit Program a straightforward solution.
“We have accreditation with the major banks,” explains Hudson. “We are a reputable and solid business turning over $67 million last year in Australia alone. It is fortunate we are in the position to provide finance sourced purely from the Snap-on network. In the majority of cases here is no need for a bank to become involved in a franchisee’s decision.
“Prior to the commencement of the Credit Program, our franchisees have typically been at the mercy of bank variable interest rates. The Program provides fixed interest rates, no ongoing fees or additional charges to franchisees, and our credit is unsecured except for a lien against the assets of the franchise itself.”
Snap-on Tools Australia is the only Australian franchise operation to offer this innovative program for franchisees, and it represents a first in the South Pacific region.
Request information on franchise ownership of Snap-on franchise