10 Tips to Financing a Franchise – by Franchise Direct

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From childhood we learn the virtues of independence, hard work and entrepreneurship. As the boss looks over our shoulders in our twenties; a work life balance disappears in our thirties and the neighbours tell us about their cruise in our forties, the dream of starting a business can become a dull ache of desire. But how do you actually go about raising the cash and ironing out a concrete business model?  

Trying to pinpoint market trends, product designs and advertising campaigns can be difficult whilst trying to juggle the business of everyday living.

Franchise businesses offer a way to get into business for yourself, but not by yourself with the training and support of the franchisor. These are the people that cried the tears and made the mistakes, so you can get to work and start smiling as your own boss.

With a tried and tested business model, franchising can prove less risky than starting up on your own.

However, with credit harder than ever to come across, many wheeze a resigned sigh at the thoughts of a bank manager granting their entrepreneurial wishes.

Small and medium sized businesses throughout the country are choking from a lack of credit. Like water to a sunflower, it’s hard to get a business to grow if you can’t get credit flowing.

Franchisors have been forced into finding a smart way for franchisees to fund their business, and there’s never been as many innovative franchise packages out there as in 2012.

  1. Many franchisors, from the big fish like McDonalds, to a small t-shirt franchise, have arrangements with many of the high street banks like Lloyds TSB and HSBC. Through these partnerships, you can borrow up to 75% of the investment price, so for a £10,000 t-shirt franchise you’ll only need to personally invest £2,500. These banks have specialist franchise and small business departments, and they know their franchisor has a successful business model that’s been tried and proven. Franchisors will maintain good relationships with the banks, meaning you have a better chance of securing funding to start a franchise business than to start out on your own.
  2. Buy-in and royalty fees, the amounts you pay a franchisor for their support and use of their brand, have been slashed across the board as franchisors seek to make up for the credit crunch, and many franchises are offering special discounted rates with minimum investment levels 30-40% lower than pre-recession times. A handful of franchisors, especially in the service sector – such as cleaning and recruitment businesses – are even offering fee free franchising for the first six to twelve months to get you off to the best possible start.
  3. A third option for starting a franchise business has been piloted by a number of product-based franchisors who are offering working capital and start up loans to franchisees, so you can borrow directly from the franchisor.

Whether your budget is £2,000 or £2m, with a sense of determination and motivation it’s possible to start your own business, with a model that works and a helping hand to get you from your first day to the end of your first year.

 

Steps To Owning Your Own Franchise Business

1. Talk to your partner and family. It’s important to have their support.

2. Assess the amount of cash you have available to invest. Will your partner be able to cover living costs for the first few months or do you need to save for this too?

3. Decide if you want to work full-time or part-time, with premises or from home. What are your key skills and what areas interest you?

4. Based on your needs, search for franchise opportunities within your budget and location.

5. Make contact with franchisors you are interested in, arrange a meeting and gather as much information as possible. Ask to talk to current franchisees.

6. Put together a comprehensive business plan, the franchisor can help you with figures and projections.

7. If you’re seeking finance, arrange a meeting with the bank manager.

8. Once your solicitor has reviewed the franchise contract, and you are happy, sign off on it.

9. Undergo the initial training, this can be residential, classroom or on the job training.

10. Whoop! You are now ready to start trading. Proceed directly to Go and start earning!

Franchise Direct UK is a dedicated resource with a wide list of businesses for sale and franchise opportunities for sale. View an impressive article index relating to franchising, franchisee success stories and more. Find your perfect franchise opportunity at http://www.franchisedirect.co.uk/

Author:

I’m Mary Cummings, a ghostwriter, collaborator and all round word doctor. I help business owners write and publish business books; I'm also passionate about helping creative freelancers find work that they love - their work sweet spot with work on their terms, projects they love and clients who are a dream to work for.

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