Franchise Financing - Finding the Money
The cost of buying a franchise can be substantial, but you don't have to be a trust fund baby to get into the franchise of your dreams. Where is the funding going to come from? That's the number one question franchise buyers ask. There are numerous sources of capital, but start with these basic steps first.
- Talk to the franchisor. About one in three franchisors provide franchise
financing directly or have arrangements with third party lenders. You will
find any financing arrangements spelled out in Item 10 of the FDD (Franchise
Disclosure Document). Even if the franchisor doesn't have money to offer, it
is still the best source of information about your financing options.
- Look within. It is a common misconception that you can or should borrow
all the money to open a franchise. Be prepared to come up with at least 25 to
30 percent of the total start-up costs. To assess personal resources, start by
preparing a personal financial statement (you'll need one to present to
lenders anyway).
- Ask family and friends. This is one of the most common ways to finance a
franchise. After all, who knows your dreams and capabilities better? Plus,
they want to help you succeed.
- Call your accountant. Ask your accountant to recommend a banker. A good
accountant - one with small business experience - is usually a great source of
leads.
- Find a specialist. You should start at the bank where you do your personal
banking, but there's a good chance you won't get what you need there. Local
banks are often unable to fund franchise projects. Your chances will be much
better with independent lenders like GE Capital Franchise Finance that
specialize in franchise lending.
- Search the SBA Franchise Registry
(www.franchiseregistry.com). The SBA's
small business lending guarantee program is a key source of loans. This
program for new franchise buyers is much easier to access since the creation
of the Franchise Registry, a central database of information about franchisors
that have been certified by the SBA.
Best Franchises for Young Entrepreneurs
Politicians, academics, and corporate leaders alike love to proclaim that the "dreams of the youth" will drive our country's economic future. It's a fine sentiment, to be sure, but many of these same leaders, blind to the realities of the modern American (and global) economy, seem to incorrectly believe that these youthful dreams include following the increasingly unreliable path of earlier generations. Get a clue!
Steps to Select and Protect a Valuable Trademark
The first thing to keep in mind when selecting a trademark is that not all words and names are capable of being protected as trademarks. No one business owner can claim exclusive rights in generic terms and logos, because all business owners need to be able to use these in order to identify their goods or services. Thus, a residential painting franchise likely could not claim exclusive rights in the name “Painting Pros”, because this is simply a generic description of the services that the business offers.
A Break Down of Franchise Royalty Fees
When you first start your franchise you typically pay a franchise fee upfront. This will cover a variety of things that depend on the franchise you're dealing with, but often it will go towards initial training, marketing, and the rights to use the franchises logos, names, systems, and products. But that's not the only fee that franchisees will pay to a franchise. In addition to the initial franchise fees, the vast majority of franchises will charge their franchisees royalties that can come in one form or another. These royalties will often go towards ongoing training, sales of goods directly from franchisor to franchisee, and advertising and marketing efforts. The exact terms for these royalties are set out in your franchise agreement, but they come in a few common forms.
