While not considered a conventional supply of financing for franchisees, many franchisors provide financing. During these tough economic times many franchisors have found ways to provide a financial boost to new franchisees. Here’s some timely information relating to franchisor financing.
The initial step in identifying whether a franchisor provides financing would be to evaluate the Franchise Disclosure Document (FDD) especially Item 10. This portion of the FDD handles franchisor financing. Another approach would be to simply ask the franchise sales representative when the franchisor provides financing.
Following are types of financing that franchisors provide:
Debt Financing
A substantial quantity of franchisors provide financing either directly or through organizations. Within the most cases this financing is perfect for equipment packages or property for that franchise location. You will find franchisors which will contain the prime lease and get the location. The franchisee will sign a sub-lease using the franchisor which includes the fundamental rent plus leasehold enhancements. This arrangement unburdens the franchisee from getting to get the additional capital for getting the land and/or developing the website.
Another illustration of franchisor financing is perfect for the gear package that may be leased in the franchisor directly or from the leasing company the franchisor works together with. Once more leasing the gear is an origin of funding for that franchisee.
In nearly all cases, these kinds of plans are often present in franchises that need a considerable investment, for example up to 3 hundred 1000 dollars. Most frequently based in the restaurant or hospitality industries.
Franchisors Financing purchasing the Franchise
You will find franchisor’s that offer direct financing by using a promissory note. The note and it is terms should be disclosed within the Franchise Disclosure Document. The note enables you to finance part of the franchise fee or beginning inventory that’s purchased in the franchisor.
A more modern practice by franchisors to emerge throughout the recent economic decline is to discount the first franchise fee. This method seems to become growing in recognition as franchisors are searching to help individuals purchase their franchise.
In case a franchisor does not provide financing on the direct basis they might be able to assist their franchisees in acquiring third party financing.
Other Franchisor Financing Options
There are several franchisors willing to supply a type of financing on the limited basis for an individual with impressive credentials. Getting operated several franchise companies I have experienced numerous franchise candidates using the talent, experience and need for the franchise who did not have the needed capital. In a few instances I discovered a method to accommodate their financial needs. Among the tools we used incorporated funding area of the franchise fee. I later incorporated this selection within our franchise disclosure document. Had a few of these individuals not impressed me and my management team using their credentials we’d not aided them. Should you represent yourself like a strong candidate towards the franchisor however with limited funding you might be amazed through the response from the franchisor.
Franchisors seeking funding for his or her new franchise might be able to obtain financing in the franchisor. Make sure to look into the FDD under Item 10 and compare the price to franchisor financing with other sources.
