CanadianFranchiseAssociationLawDay

March3,2009

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Overview▪ IntroductionofPanellists▪ TheStateoftheEconomy&Franchising▪WhenisFinancingTypicallyRequired?▪ HowcanaFranchisorImproveaFranchisee’sSuccessinObtainingFinancing?▪ SourcesofFinancing▪MethodsofFacilitatingLoansandOtherBestPractices▪ KeyDocumentstoFacilitatetheLoanProcess

▪ DealingwithProblematicScenarios

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IntroductionofPanellists

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TheStateoftheEconomy&Franchising UnitedStates▪ Economy▪ Franchising–IFAEconomicOutlook‐2009

Canada▪ Economy▪ Franchising–CFAMembershipSurvey‐2009

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WhenisFinancingTypicallyRequired?

Franchisor

Franchisee

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HowcanaFranchisorImproveaFranchisee’sSuccessinObtainingFinancing?

Consider: SourcesofFinancing MethodsofFacilitatingLoansandOtherBestPractices

KeyDocumentstoFacilitatetheLoanProcess

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SourcesofFinancing

Traditional FinancialInstitutions CanadaSmallBusinessFinancingProgram(CSBF)

Non‐Traditional Franchisor FamilyandFriends BusinessDevelopmentBankofCanada&BusinessCoaching OtherAlternativeLenders?

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MethodsofFacilitatingLoansandOtherBestPractices

UnderstandingtheLender’sPriorities▪ CashFlowandRiskAnalysis▪ Security

DisclosureDocumentReviewandUpgrade EnsureAccuracyandConsistency CriteriaforChoosingFranchiseesandSiteSelectionCriteria EnsureAccuracyofAnnualOperatingCostsandEarnings

Projections

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MethodsofFacilitatingLoansandOtherBestPracticescont...

WorkingCapitalRequirements AllocateInternalResourcesorOutsourceLender

RelationshipswithBrokers FranchisorDueDiligencetoPre‐qualifyProspectsEarly

andRegularly DealingwithMulti‐UnitFranchisees

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MethodsofFacilitatingLoansandOtherBestPractices

GenerateListofPreferredLendersandMeetwithThem PrepareOperationalPro‐formaStatements ReviewofFranchisor’sInternalSystems

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KeyDocumentstoFacilitatetheLoanProcess

ConsentFormfromFranchisee Franchisee’sPersonalGuarantee CertificateofInsurance EmploymentHistory PersonalCreditHistory

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KeyDocumentstoFacilitatetheLoanProcess

BusinessPlan[SeeAppendixformoredetails] OtherDocuments

GeneralSecurityAgreement SubordinationAgreement RegistrationofNoticeofSubordination Franchise(Comfort)Letter

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DealingwithProblematicScenarios

Pre‐defaultFranchisorActionforProblemLocations FranchiseeLoanDefault:Bank/FranchisorCooperation Franchisee’sFAisTerminated FranchiseeInsolvent,BankruptorVoluntaryAssignedinto

Bankruptcy....

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DealingwithProblematicScenarios

FactorsAffectingFranchisorDecision&Action(Possession,Operation,PayBank,DoNothing)

FranchisorHasAssumedControloftheBusiness ResaleofBusiness

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JosephAdler LorraineMcLachlanjadler@hofferadler.com lmclachlan@cfa.ca416.977.3444 416‐695‐2896www.hofferadler.com www.cfa.ca

RossBain CharlesScrivenerrbain@primerestaurants.com charles.scrivener@cibc.com905‐568‐0000 (416)980‐3225www.primerestaurants.com www.cibc.com

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Financial Profit&lossandcashflowforecasts Openingbalancesheet Costofbusinesswithbreakdownbyasset Howbusinesswillbecapitalized(ownerequity,landlordTI,bankloan)

Howloanwillbesecuredandrepaid

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Non‐Financial Howandwhythesitewaschosen Howthefranchiseeisqualifiedtorunthebusiness Backgroundonfranchisoranditstrackrecord

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