CRELender understands franchises require a brand of financing all their own. Franchisees will have a lot of specific questions unique to running a franchise and it is essential that they partner with someone who can provide specific answers. Even having another party analyzing your market can be invaluable to early decision making. So just remember the old adage; you’re in business for yourself, but not by yourself.
At one time, a good credit score and the backing of a big franchise name was enough to secure funding for a new franchise purchase. Most banks now consider even A-list franchise as merely a temporary business investment, involving renting or leasing an opportunity, not buying a business for the purpose of ownership. It is classified as a wasting asset due to the finite term of the license and the many and ever renewing franchising fee’s.
Its important to hear about the financials from someone other than the firm offering the franchise venture. Make sure you have enough capital to cover every cost associated with the business including all pre-opening costs, have enough set aside for your family budget, and enough operating cash for the business to make it through the break-even point. An initial franchise fee, anywhere from several thousand to several hundred thousand dollars can be its own hefty investment. In addition you’ll have to pay to furnish your franchise with the necessary inventory and equipment. Starting your business may take several months. Estimate your operating expenses for the first year and of course your personal living expenses for up to two years.
You will need financing to support the initial and ongoing costs related to opening and running your franchise. This will include but is not limited to all deposits or franchise fees that may be non-refundable, and costs for initial inventory, signs, equipment, leases, or rentals as well as ongoing costs such as royalties and advertising fees.