Franchising is an increasingly popular business model because of its strong success rates.  The Franchisee pays royalties and fees. In return, the Franchisor furnishes trademarks, trade names, provides support on financing, advertising, marketing, and training. This relationship provides Franchisees the opportunity to use developed trade names, leverage past experience, and execute proven systems to help ensure the success of their local operations.

“A continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising, and management in return for a consideration from the franchise.”
International Franchise Association

What are the advantages of owning a franchise?

Owning a franchise allows you to go into business for yourself, not by yourself. A franchise provides franchisees with a certain level of independence where they can operate their business. A franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily take years to establish. A franchise increases your chances of business success because you are associating with proven products and methods. Franchises may offer consumers the attraction of a certain level of quality and consistency because it is mandated by the franchise agreement.

Franchises offer important pre-opening support: site selection, design, construction, financing, training, and grand-opening programs.

Franchises offer ongoing support: training, national and regional advertising, operating procedures and operational assistance for ongoing supervision, management support, increased spending power and access to bulk purchasing. There are a number of aspects to the franchising method that appeal to prospective business owners such as:

  • Easy access to an established product.
  • A proven method of operating a business.
  • Reduced risk of opening a business.

In fact, statistics from the U.S. Small Business Administration and the U.S. Department of Commerce show a significantly lower failure rate for franchised businesses than for other business start-ups. The franchisee purchases not only a trademark, but also the experience and expertise of the franchisor’s organization. However, a franchise does not ensure easy success. If you are not prepared for the total commitment of time, energy and financial resources that any business requires, you should stop and reconsider your decision to enter the franchise business. A franchise typically enables you, the investor or “franchisee,” to operate a business. By paying a franchise fee, which may cost several thousand dollars, you are given a format or system developed by the company (“franchisor”), assistance from the franchisor as well as the right to use the franchisor’s name for a limited time. For example, the franchisor may help you find a location for your outlet; provide initial training and an operating manual; and advise you on management, marketing or personnel. Some franchisors offer ongoing support such as monthly newsletters, a toll-free phone number for technical assistance, and periodic workshops or seminars. 

How do I finance my franchise?

There are many ways to finance a new franchise and an entrepreneur should be prepared to do some thorough research on the subject to make sure they find the options which will work best for them. With our free consultation, one of our Your Own Franchise advisors will be able to help answer more specific questions regarding your financing options. Some possibilities for financing a franchise include: Small Business Financing Options

  • Cash
  • Home Equity Line of Credit
  • Bank Loan
  • SBA Loan
  • Equity Financing
  • Retirement Accounts
  • Franchisor Financing
  • Partners/Friends/Family
  • Credit Cards

Cash. This is one of the safest methods of financing a franchise. There are no loans to pay back and it helps with the cash flow of a business starting out. If you have all the money you need in liquid or semi-liquid assets (cash, stocks, home equity, etc.) to start a business as well as run it to the break-even point, you could self-finance the purchase.

Bank Loan. This might be the easiest way to borrow money. This option works best if you have sufficient personal collateral to secure a loan. This collateral is usually in the form of home equity but you will find many banks are willing to get creative with other forms of collateral. If you are pursuing a bank loan, another great resource is to access the programs available through the

U.S. Small Business Administration (SBA). You should make yourself familiar with the SBA’s Web site (www.sba.gov/) as it has information on financing options and also explains how to write a loan proposal. If you do decide to borrow money, lending institutions may require a cash investment typically 20% or more of start up costs. Recognizing that small businesses are an important part of our economy, the government has established through the SBA, its own loan program, the Small Business Investment Company Program (SBIC).  You can find out more about the loans programs offered by the SBA at https://www.sba.gov/category/navigation-structure/loans-grants or ask a Your Own Franchise advisor during your free consultation. Equity Financing. Equity financing requires that you sell someone ownership interest in your business in exchange for capital. Investors may be friends, relatives, acquaintances, or employees.

Retirement Accounts. If you have an IRA or other retirement saving account, you’re in luck!  You may be able to use that money to help invest in a franchise.  Many new entrepreneurs are unaware of government programs that allow individuals to use resources they already control and are at their fingertips. By working with a financial advisor you may be able to set up an account that allows you to use retirement funds for investing in a franchise without taking a taxable distribution or incurring penalties! Essentially you are investing in yourself and saving the debt you’d incur by taking out a loan. As your business becomes profitable, your retirement account will also realize gains ─ tax deferred.

Franchisor Financing. Some franchisors work directly with financial companies to provide loans for new and existing franchisees.  If your franchisor offers one of these programs and you qualify, this may be a good option for you.

Credit Cards. Because of high interest rates and low credit limits, credit cards are usually not the best place to look for money when financing a business. Monthly finance charges can add significant costs to your overall investment. A better use for your credit cards would be to save them for emergencies. The best plan when getting financing for your new business is to be very thorough, organized and prepared. Lenders will want to see your loan proposal which includes how and what the loan will be used for and why it is needed. This is where a franchise brand, existing units and proven systems can help a great deal.  The more research you have done, the better prepared you will be to find financing for your new franchise opportunity. You are just a few clicks away from starting the process for your free consolations with one of our Your Own Franchise advisors.

 

Do I need experience in a particular industry?

In a word, NO. Franchise companies are the experts in their respective fields and are searching for hardworking folks with the passion and skill to execute their proven model. Specific criteria varies with every franchise. Most importantly they are looking for a mutual fit. Many new entrepreneurs view franchising as a great way to transition to a new industry.

How do I know I’d make a good franchisee?

If you’re self motivated, have an entrepreneurial spirit and like following a proven business model, then franchising may be the right choice for you.

The most important step in evaluating a franchise opportunity is examining your lifestyle, experience, and financial objectives. An ideal franchisee is a creative, outgoing person who is eager to succeed. The fundamental key is to be able to balance your entrepreneurial initiative and merge it with the proven branding and systems of an established franchise brand. When you purchase a franchise, you are making a commitment to form a successful partnership between yourself and the franchisor. This involves mutual understanding of each other’s values and achievements.

How can Your Own Franchise help me?

We’ll help you find the right franchise, period. YOF independently represents hundreds of Franchise companies which allows us to find an opportunity without bias that will meet the specific needs of each individual we work with. We will guide you through the process and help answer any questions you have to make an informed decision for you and your family.  This is all 100% free with no fees or cost to you!

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