Franchise Lending: Where Strength in Numbers Meets Proven Success

by Ian Koplin
Peter Salas
Senior Vice President and Head of Franchise Lending
Regions Bank

Regions Bank launched its franchise lending team at the end of 2022, installing Peter Salas and a team of subject matter experts to grow the business and help franchisors and franchisees across the bank’s footprint. Salas spoke with ABF Journal to detail the unique benefits and challenges of franchise lending and what makes it an attractive industry to serve.


More than half a year ago, Regions Bank launched its franchise lending team, naming Peter Salas senior vice president and head of franchise lending to lead the charge into the diverse and specialized world of franchise financing. Under Salas’ leadership, the team focuses on developing relations with franchise owners throughout Regions Bank’s footprint, namely the Southeast, Midwest and Texas. With an abundance of franchise owners in Regions’ established footprint, the team is able to connect small business owners with subject matter experts to provide financial guidance and advice tailored to meet those companies’ unique needs.

According to Salas, the first thing to know about the franchise industry is it is as large as it is specialized. Franchise models present a unique set of benefits and challenges that don’t exist in other forms of business creation. Some banks are large enough to contain a franchise vertical for larger, multi-unit operators and some even specialize in those specific spaces, but the same is not always true for smaller unit and single-unit operators. Salas and his team are attempting to solve that problem by supporting franchisees of all sizes with relationship managers who have vast knowledge of franchise ownership and operation and can help support the franchise businesses within the communities they operate.

When most people hear the word ‘franchise’, they tend to think of fast food restaurants like McDonalds, a company that practically set the standard for success in creating an empire by allowing entrepreneurs to join its concept through franchisee ownership. While the restaurant sector has taken advantage of this model for decades, Salas says the core concept of franchisee ownership, and therefore franchise lending, is inherently successful because of the benefits brought on by being part of a larger network.

“When you own a franchise, you are part of that concept and part of a proven model that you buy into,” Salas says. “And if you execute to that model, you should be successful like most of the franchisees are in brands. There’s something called a franchise disclosure document that you have to adhere to — a franchise agreement — and in exchange for that proven model and that process, you have to pay fees to the franchise, so that’s something that’s a little bit different too. But [franchised businesses] seem to perform well — and in some cases outperform — non-franchise businesses in similar sectors because of the system support you get.”

You do not need to look far to notice how the franchise industry has taken this model, dominated by restaurants for decades, and turned it into a winning strategy for growth across other sectors. Salas says the franchise model has been successful in a wide swath of sectors, including the automotive industry, business services, personal services, fitness, early childhood learning centers, beauty products and more.

The expansion of franchising to other industries is being welcomed by entrepreneurs looking to grow their livelihoods through something other than restaurant ownership, according to Salas, and that’s where the Regions Bank franchise lending team comes in. With a footprint situated in the Southeast as well as in Texas and the Midwest, the team’s goal is to help small business owners and entrepreneurs alike attain their dreams by creating a rock-solid relationship and providing small business strategy expertise as well as financing.

“We really want to help those single-unit operators and a lot of them want to grow and become a multi-unit operator,” Salas says. “How do they get location No. 2? How do they expand their business? This is really where we feel we can add significant value with our subject matter expertise in helping the smaller-unit operators be successful, run their business efficiently and grow and expand their business.”


The franchise industry is not without its own unique challenges. Despite having a proven model of success as well as a cohesive network of resources, peers and brand recognition, this industry is as prone to the unexpected disruption as the next. The COVID-19 pandemic proved to be a trying time for many franchises in particular due to stay-at-home orders, social distancing, labor shortages, supply chain issues and a dizzying myriad of other issues and concerns, some of which are still ongoing today. Thankfully, federal funding through initiatives like the Paycheck Protection Program proved to be a saving grace for many businesses, particularly franchise businesses.

“No business is set up for zero revenue. They still have expenses to make, so that PPP funding actually helped many businesses stay afloat,” Salas says. “Some banks helped and worked with their customers with payment deferments and some other ways to offer relief to their customers while going through the pandemic.”

Some franchisees were well-positioned to face something like a global pandemic thanks to the support of their franchisors. With banks and lenders helping their customers through the pandemic, franchisors in turn helped their franchisees.

“If you were a franchisee and you had great system support from the franchisor, they also supported their franchisees through this difficult situation. And it’s not surprising to see that franchises did well in the recovery,” Salas says. “For example, service-based franchises outpaced all others in 2021 with a 3.6% increase, while 2022 estimates of all franchises were up 2%. And in 2023, it’s projected to be about flat year over year. So, it’s shown that they’ve gotten out of it, it’s in the back view mirror and there’s some positive growth in the future.”

Considering the current state of the economy, Salas identifies three main hurdles franchisees and their lenders will have to overcome in the near future: inflation, high interest rates and labor shortages. Elevated inflation and high interest rates have increased the cost of goods as well as the cost of capital, so companies seeking to grow are sitting tight due to a concern that the cost of expansion will prove to be too great or because they can’t afford to expand in the first place. The third hurdle is the labor market. According to Salas, the number of workers willing to work in franchise businesses shrunk throughout the pandemic and hasn’t quite recovered to pre-pandemic levels.


Uncontrollable global issues aside, franchise ownership and franchise lending remain a permanent fixture for multiple industries. In almost any urban or suburban four-way stoplight intersection, you can see a franchise of some sort either by advertisement or physical location. It’s an attractive venue, one that is growing, and with growth, comes the need for funding. Because of this and because of where the economy currently stands, Salas says creativity and flexibility will go a long way in helping franchisors and franchisees continue to recover from the pandemic and seize market opportunities. Salas says Regions is committed to serving these small business clients, particularly as it continues to build out its franchise lending team. Having this deep network of subject matter experts and a slew of ancillary product offerings through the overall Regions platform puts the bank’s franchise lending team in a strong position no matter what lays just over the horizon.

“There are still some headwinds out there to contend with and navigate through,” Salas says. “High inflation, high interest rates, the tight labor market, the quality of the labor market, and we still have some geopolitical instability to name a few [concerns for the rest of 2023]. But we’re still bullish that franchises operating with successful models over a period of time do well and typically outperform non-franchise businesses. So, it’s a testament of the advantages of franchising and having the support of a franchise concept.”

ABOUT THE AUTHOR: Ian Koplin is editor of ABF Journal. Phil Neuffer, managing editor of ABF Journal, interviewed Salas for this article.