By Nigel Davies, managing director and co-founder at digital workplace platform, Claromentis.
The franchise funding tap has turned on – with a caveat. Britain’s major banks, including Barclays and NatWest, are shifting the credit lens from P&L to process. Today, it’s not just financial data points that move lending decisions; it’s operational discipline. This analysis explores the three core dimensions of operational risk, the evidence lenders are asking for, and the most effective way to present it. The takeaway is simple: stronger systems, stronger credit appetite.
From financing units to financing systems
Banks don’t just finance franchisees – they finance the integrity of the franchisor’s operating model. Traditional due diligence will still probe a franchisee’s creditworthiness and the network’s trading performance. But lenders have become wary of strong numbers that sit atop a fragile operating base. A system that cannot enforce its model at scale, evidence its compliance, or service a growing network reliably will see today’s profits weakened by tomorrow’s risks.
Operational risk as a leading indicator
Lenders frame operational risk across three dimensions: model risk, conduct and compliance risk, and servicing risk.
Model risk concerns whether the franchisor can enforce standards consistently as the network grows. The requirement is that the operating model is teachable, auditable and applied uniformly, so current performance is not eroded by future variance. Conduct and compliance risk occur whether policies are current, acknowledged and traceable, and whether training is refreshed on schedule. Version control, “read and understood” confirmations, and timely recertification demonstrate a network-wide commitment to compliance, keep people properly informed and embed compliance into day-to-day practice. Servicing risk assesses whether the centre can support franchisees quickly and predictably. Requests should be routed to the right teams and resolved within agreed timeframes. Orderly queues, clear ownership and reliable SLA performance indicate that capacity can scale with demand.
Taken together, these are leading indicators of future performance. When recertification slips or acknowledgements lag, incident rates (and costs) tend to follow. Lenders, therefore, look for demonstration, not assertion. Systems should enable franchisee success as units are added, and growth should not come at the expense of quality.
What credit teams expect to see
Training is the first test. Lenders want to know that every role across the brand receives complete and relevant training, that course completion and recertification are tracked, and that the picture is visible at the unit and network level. Within Claromentis, certificates can be issued automatically, mandatory pathways assigned by role, and training records updated in real time, with progress and pass rates reviewed via dashboards – providing exportable evidence for diligence.
They also look for a living knowledge base. Product and service guidance should sit in one searchable source of truth, enriched with subject-matter expertise and practical FAQs. When orders, specifications or service processes rely on scattered documents, errors and delays proliferate. A coherent repository reduces rework and signals that the operating model is teachable and repeatable, with articles available as downloadable PDFs for offline use by field teams when connectivity is limited.
Policy control is another tell. Operations manuals that are monolithic, unsearchable and rarely read no longer inspire confidence. Lenders favour atomised, version-controlled policies with audit trails and explicit acknowledgements – particularly for high-risk topics. Standard updates should be acknowledged promptly. This is not bureaucracy for its own sake; it is governance made visible.
Support must scale with service discipline. As networks grow, franchisee requests should route to the right team (marketing, HR, compliance, finance) with status, priority and context intact. Service-level agreements (SLAs) should be applied consistently, so the franchisor can evidence responsiveness and resolution times. Orderly queues and measurable SLAs reassure lenders that service continuity will be maintained as volumes rise.
Finally, onboarding should run according to a plan. The early journey of a new franchisee (training, compliance, site fit-out, launch marketing) should be orchestrated through a standard project template. Milestones, owners and due dates create a predictable onboarding programme that reduces time to first revenue. This demonstrates that growth can be replicated rather than improvised.
Packaging the evidence
When presenting to a lender or adviser, franchisors should marshal a small set of artefacts that demonstrate operational strength. A compliance dashboard should show training records and policy acknowledgements by location, highlighting recertification and exceptions. SLA reports should summarise support volumes, response times and resolution performance across the network. The knowledge base should be demonstrated as the functional replacement for a static manual, not supplementary to it. A concise screen-capture or short walkthrough typically suffices. Finally, a sample onboarding project should illustrate how milestones are tracked from agreement to opening.
Durable growth, better terms
Franchisors and banks both want durable growth. enders’ appetite for significant loans has returned. In some cases, they will lend without personal guarantees, provided the financials and the operating model stand up to due diligence. For franchisors, the immediate benefit of transparent, structured operations is better support for franchisees. The secondary benefit is material too, with faster access to finance on more attractive terms. In a market where capital is selective, the lender-ready franchise is the one that treats operational discipline as a core asset – and can prove it.
