Tweet

4 Ways to Finance your Franchise

Written by: Sebastien Page

Article Overview: If you are interested in buying a franchise, you have probably taken into account all of the benefits that a franchise offers over starting your own business. You will benefit from a proven successful business model and an established brand name.

4 Ways to Finance your Franchise

If you are interested in buying a franchise, you have probably taken into account all of the benefits that a franchise offers over starting your own business. You will benefit from a proven successful business model and an established brand name.

The franchisor will support you in a variety of ways – from providing training for you and your employees to paying for marketing and advertising. However, opening a franchise can be more costly in some ways than starting your own business. In addition to the costs every new business faces; utility bills, office supplies, rent, and payroll, you have to pay the franchisor a fee to use their name and services, and royalties to support their advertising and operations. This can still be a good deal for you, as it can be more efficient and less risky overall and therefore less costly for you in the long run, but it can be a lot of expense up front to deal with. What are your options for funding this franchise?

1. Ask the franchisor. Some franchisors will offer financing, effectively loaning you the money to buy their franchise. Many will not, and some will only offer partial financing. If not, some franchisors will be willing to help you in the financing process by referring you to a lender of theirs.

2. Banks. If the franchisor will not help you fund the franchise, your next step is to try a bank loan. When choosing a bank loan option to finance your franchise, shop around. Some banks specialize in loaning money to small business owners. Some banks may have more appealing terms and lower interest rates than others. If you are having a hard time figuring out bank loans, get a lawyer to help you interpret the agreements before you sign anything.

3. Ask people you know. Find out if any of your friends or family have extra money and would be willing to invest in you. You should offer them a return on their investment, just as you would pay an interest rate to the bank. However, take great care when exercising this option. If things should go badly with your franchise and you are unable to repay the people you know, things could go sour in your personal relationship, so be willing to take that risk if you are going to ask someone you know to invest in you.

4. Pay for it yourself. If this option is available to you, it has the advantage of keeping you from having to pay interest on the money you used to buy the franchise. If you have enough cash but would be stretching yourself thin, weigh the benefits of no interest with the costs of tying up all of your money into your business. You may want to have cash on hand for other things. Furthermore, although buying a franchise is considerably less risky than starting your own business from scratch, you still bear some risk, and if all of your cash is tied up in the franchise, you may find it even more problematic than had you borrowed the money from a bank.

Related Articles
  Financing a Subway Franchise in the United Kingdom
  Franchising with all its Success
  Looking for Ways To Finance a Franchise ? There Is Only 1 Way When Financing a Franchise Investment!
  Tips on writing a Franchise Business Plan
  Top tips for franchise success

Article Tags: bank loan, bank loans, brand name, business model, buying a franchise, extra money, franchisor, franchisors, hard time, interest rate, interest rates, loan option, new business, office supplies, payroll, royalties, small business owners, starting your own business, successful business, utility bills



Related Forum Posts
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

African Technology Development

Building a Business From 30,000 Feet

3 Key Factors For Raising Capital

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.