Franchising is a popular way for entrepreneurs to achieve “The American Dream.” According to Statista, there were about 750,000 franchised establishments in operation in the U.S. at the end of 2021, and thousands more open every month. Three of the key challenges that face new franchise owners are finding the right franchise concept for them, finding the right location or territory, and securing financing to deal with franchise costs.
Why is Franchising So Popular
Franchising is popular because a new owner gets the huge advantage of buying into a system that has demonstrated some success from proven strategies and a defined operating system, compared to starting a business from scratch. The new owner benefits from some established brand awareness, a built-out supply chain, a defined marketing program and franchisor marketing support, peer support, franchisor training, and operating support, peer support, compliance standards, and assistance with franchise costs.
What Are Some Typical Franchise Costs
The typical franchise costs start with an initial franchise fee or licensing fee which essentially provides access to the name, systems, and proprietary features of the brand. Additionally, there may be real estate and property improvement costs, furniture and fixtures, professional services costs such as accounting and legal costs, supplies and equipment, insurance, training, and marketing costs.
Sources of Financing to Cover Franchise Costs
Sources of financing to cover franchise costs include:
- Assistance from the franchisor can come from corporate funds or its lending partners.
- Commercial bank loans.
- SBA loans that are approved and funded by banks and other lenders and partially guaranteed by the Small Business administration.
- Self-generated funds including second mortgages and retirement funds.
- Loans from friends and family.
- Loans from alternative lenders and financing specialists.
Seek Expert Financing Assistance
Contact WHW Capital, based in Denver, CO. We have a wide variety of financial solutions and a great reputation for helping our customers get the loans they need as quickly as possible and that are easy to qualify for.