Capital Access

Gaining access to and securing capital is more important for franchisees today than ever. Every week we talk with multi-unit franchisees about how they are growing and the kind of financing it takes for them to achieve their goals and objectives. It's an important topic and sometimes we get some very candid responses.

Darrell Lamb saw franchising as a sideline business we he first invested in an Express Oil Change franchise back in the mid-90s. "I didn't really think of it as a career," he says. But that's exactly what it became. Then things really took off about five years ago when he began working with Adam Fuller, a fellow entrepreneur and kindred spirit. A year later the two formed LF Management and now operate 24 Express Oil franchises under that umbrella group. Lamb couldn't be happier with the way it's turned out.

Last year the company did about $20 million in annual revenue and Lamb says he'd like to add one new development unit during 2010 and acquire some others. "We're always looking for an acquisition that makes a good fit. I talk to existing franchisees on an ongoing basis. Acquisitions are the fastest way to grow," he says. The way he sees it, he'd like to be at 35 units doing $50 million in sales five years from now. Now that would be quite a return on investment.

What did you change/do differently during the recent tough economic times that you plan to continue doing into the future? We're trying to create better management systems, to set goals for my guys with a clear evaluation.

How do you forecast for your business during trying times? Can you even forecast at all? We try to stay very informed on the macro world of economics and banks, but I think if I was a great forecaster I'd be in a different business. I can only control what I can control. If we go in, provide superlative service with the right people, I can limit my downside regardless of what the economy does.

Where do you find capital (for expansion)? Five years ago, if you had a good regional bank you could finance everything. That's not the case anymore. I'm with five banks, five relationships.

Is capital getting easier to access? Why/why not? Financing in the last four months seems to have increasingly become more difficult. Six months ago we weren't having any trouble and it's tougher today than I've ever seen it.

Have you used private equity, local banks, national banks, other institutions? Why/why not? When I started I was exclusively with regional banks, and we developed a relationship with a national bank in the last seven or eight years. I've got loans at local banks and on a macro trend side local banks are stepping up to the plate for Express Oil franchisee owners. Regional banks have pulled back in some, but we just did a deal with a regional bank.

What kind of exit strategy do you have in place for your business? My exit strategy - and I don't know when it will be - is to sell the business and hold the real estate. I think in terms of five years and I'm not going anywhere in five years.