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Marco’s Pizza Dishes Out Personal-Guarantee Insurance To Franchisees

In an effort to help potential franchisees get started despite deficient financing, the Ohio-based pizza chain is offering personal-guarantee insurance (PGI) that would cover up to 70 percent of the borrower’s liability for franchisee candidates. recently reported on the company’s program that would help secure more bank loans and expedite the overall process to help new franchisees get a piece of the pie.

“We think this can be an absolute game-changer in finance, helping all kinds of small businesses, especially restaurants,” said Marco’s chief financial officer Ken Switzer.

PGI is an alternative to the standard Small Business Administration 7(a) loan that safeguards a franchisee’s assets in case of a default on a bank loan. In the event of a default, the PGI policy can cover up to 70 percent of the balance owed to the bank. The pizza chain is even going a step further by supplementing the guarantee with a pledge to cover an additional five percent of the liability. This leaves only 25 percent of the balance to the franchisee, which the company would try to alleviate by working out a payment plan to avoid bankruptcy.

Marco’s decided to offer PGI because it would allow the pizza chain to grow with partners who did not have the cash flow or were not already high-net-worth individuals. The company is also offering PGI to existing Marco’s franchisees that want to open more stores despite a personal net worth that can only cover the cost of their current location.

This is not the first in-house lending plan for Marco’s, which has run its own loan-guarantee program called Marco’s Assurance for the last few years. For that program, the franchisor guaranteed $50,000 of any franchisee’s liability on a defaulted loan after liquidation. It was an innovative strategy that was commended by the International Franchise Association. With PGI, Marco’s is showing once again that it values its franchisees and will do everything possible to give them a slice of success.

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