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Can I pay the franchise fee in instalments?
You can pay the franchise fee in whatever way is set out in the franchise agreement, and the franchise agreement could (although it would be unusual) envisage there will be instalment payments. The reason that this is unusual is two fold. The first is that almost always after execution of the franchise agreement the franchisor provides initial training and a copy of the franchisor’s manual. Both are the ‘crown jewels’ in terms of the franchisor’s know how and expertise. In such circumstances franchisors are understandably nervous about providing this information to a prospective franchisee who has not paid in full. The second reason why instalment payments are unusual is that franchisors normally establish good relationships with the franchise units of the banks, which are willing to provide finance to prospective franchisees of brands with which they are comfortable. In such circumstances a franchisee should find it straightforward to borrow sufficient funds to pay the full amount of the initial fee. If that is not the case, then the franchisor may have question marks over the franchisee’s creditworthiness or ability to fund the business. Having said all of that, a small number of franchisors do support those incoming franchisees who they believe will be successful, even if they do not have sufficient funds. The support takes the form of either a loan or the payment of the initial fee in instalments or a reduced management fee in the early days of the franchise.
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