Franchise Financing - Finding the Money
The cost of buying a franchise can be substantial, but you don't have to be a trust fund baby to get into the franchise of your dreams. Where is the funding going to come from? That's the number one question franchise buyers ask. There are numerous sources of capital, but start with these basic steps first.
- Talk to the franchisor. About one in three franchisors provide franchise
financing directly or have arrangements with third party lenders. You will
find any financing arrangements spelled out in Item 10 of the FDD (Franchise
Disclosure Document). Even if the franchisor doesn't have money to offer, it
is still the best source of information about your financing options.
- Look within. It is a common misconception that you can or should borrow
all the money to open a franchise. Be prepared to come up with at least 25 to
30 percent of the total start-up costs. To assess personal resources, start by
preparing a personal financial statement (you'll need one to present to
lenders anyway).
- Ask family and friends. This is one of the most common ways to finance a
franchise. After all, who knows your dreams and capabilities better? Plus,
they want to help you succeed.
- Call your accountant. Ask your accountant to recommend a banker. A good
accountant - one with small business experience - is usually a great source of
leads.
- Find a specialist. You should start at the bank where you do your personal
banking, but there's a good chance you won't get what you need there. Local
banks are often unable to fund franchise projects. Your chances will be much
better with independent lenders like GE Capital Franchise Finance that
specialize in franchise lending.
- Search the SBA Franchise Registry
(www.franchiseregistry.com). The SBA's
small business lending guarantee program is a key source of loans. This
program for new franchise buyers is much easier to access since the creation
of the Franchise Registry, a central database of information about franchisors
that have been certified by the SBA.
Beware of Franchise Scams
A franchise is only as good as its brand name, which eventually determines the performance and success of other franchisees within the system. Aside from happy franchisees and a strong brand, another indicator of a strong franchise is one that utilizes a broad recruitment process, which at some point replaces the selling process so only the best prospects gain entry into the system.
Why More Men are Investing in Women’s Gyms
FranchiseHelp sat down with the next generation of that fitness legacy, Lucille Roberts President Kevin Roberts. Kevin discusses his mothers impact on the company and why the women's fitness niche continues to grow at a rapid pace. Kevin also gives insight on what it takes to be a good candidate to own a Lucille Roberts Women's Fitness gym franchise.
Why Do Companies Franchise?
The most successful entrepreneurs, however, eventually come to recognize that achieving long-term success requires that they step back and put in place the right systems, processes, and people to expand their company beyond what any one individual -- no matter how motivated and sleep deprived -- could possibly manage on his or her own. Once a business owner sees what's possible when employees take on operational responsibilities that free management to actually manage instead of act like their own employee, he or she quickly understands the enormous power that scalability means for a business.
