In many cases, franchisors offer franchise financing. They typically can assist with 15% to 75% of what you need.
Other options include banks, friends, family, investors, and others.
There are many other options and tips to consider when it comes to franchise financing.
U.S. Small Business Administration
One source of help to refer to is the U.S. Small Business Administration. Since its founding on July 30, 1953, the U.S. Small Business Administration has delivered millions of loans, loan guarantees, contracts, counseling sessions and other forms of assistance to small businesses. An SBA loan may be one option for franchise financing.
SBA provides assistance primarily through its four programmatic functions:
Access to Capital (Business Financing, including franchise financing)
Entrepreneurial Development (Education, Information, Technical Assistance & Training)
Government Contracting (Federal Procurement)
Advocacy (Voice for Small Business)
Wikipedia notes that “The Small Business Administration is a United States government agency that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters”. The agency’s activities are summarized as the “3 Cs” of capital, contracts and counseling.”
In this case, “capital” may include options for franchise financing.
Check with your local SBDC for free face-to-face business consulting and at-cost training, on topics including business planning, accessing capital (including franchise financing), marketing, regulatory compliance, technology development, international trade and much more.
SBDCs are hosted by leading universities, colleges, state economic development agencies and private sector partners, and funded in part by the United States Congress through a partnership with the U.S. Small Business Administration.
There are nearly 1,000 local centers available to provide no-cost business consulting and low-cost training to new and existing businesses.
“Individuals pursuing a franchise opportunity have about 3,000 franchises to choose from, however, by having a plan you’ll be able to narrow your choices down to the best franchise for you. There are numerous resources available that provide advice on how to select and evaluate a franchise. Resources include the Internet, International Franchise Association, the FTC and The American Association of Franchisees and Dealers. However, the best approach is to match your financial resources, business skills, work experience and personal profile to the franchise opportunity that most closely fits these characteristics.”
Very much in line with the coaching and consulting I provide to my clients, the author looks for a personality fit, interest fit, skills / experience fit, a financial match, a fit with the time needed / expected, and a match with personal goals. Other keys include how hands-on you wish to be, and how objective you are when it comes to your own strengths and weaknesses. Finally, what is your contingency plan, depending on how things go.
Want to know more? Check out my franchising resources page – or, better yet, contact me for an initial call or meeting as a first step toward evaluating whether franchising is right for you.
They put this forth as the minimum requirements of a fair and equitable franchise system:
The right to an equity in the franchised business, including the right to meaningful market protection.
The right to engage in a trade or business, including a post-termination right to compete.
The right to the franchisors loyalty, good faith and fair dealing, and due care in the performance of the franchisors duties, and a fiduciary relationship where one has been promised or created by conduct.
The right to trademark protection.
The right to full disclosure from the franchisor, including the right to earnings data available to the franchisor which is relevant to the franchisees decision to enter or remain in the franchise relationship.
The right to initial and ongoing training and support.
The right to competitive sourcing of inventory, product, service and supplies.
The right to reasonable restraints upon the franchisors ability to require changes within the franchise system.
The right to marketing assistance.
The right to associate with other franchisees.
The right to representation and access to the franchisor.
The right to local dispute resolution and protection under the laws and the courts of the franchisee’s jurisdiction.
A reasonable right to renew the franchise.
The reciprocal right to terminate the franchise agreement for reasonable and just cause, and the right not to face termination, unless for cause.