Franchising is an exciting opportunity to join a thriving business as an entrepreneur. You get to apply your strengths and experience while also gaining the credibility and support of an established brand to help your venture thrive. Still, franchising requires careful planning to succeed.
Here are three franchise financing essentials to have in place before opening your own location:
- Franchise Disclosure Document (FDD) – The FDD is provided by the franchising company and discloses information about the company’s financial performance, its franchise fees and royalty structure, as well as the franchisee’s responsibilities and initial investment costs. The FDD is your starting point in planning for your franchise.
- Financing options assessment – From initial investments to ongoing contingencies, a thorough assessment of your franchise financing options will help you mitigate risk and stay on track with your business. Cultivating long-term relationships with lenders, applying for SBA loans, and considering your willingness to leverage personal assets all need to be evaluated so you are confident in where you stand and what you can leverage to help your franchise succeed.
- Cash investment – While many franchise owners acquire loans to secure their start-up expenses, lenders usually require a percentage of the investment to be covered by the franchise owner in cash. This amount will vary depending on a variety of factors but can be as much as 30% of the total investment.
At TB Capital Partners, we help entrepreneurs like you implement smart franchise financing strategies to help your franchise thrive. From securing capital to financial planning to networking lender relationships, we’re your partner in small business success.