Will a franchisor help me to fund a franchise?

Louise Harris writes:

There are several types of assistance for funding a franchise if you need to borrow.

The first most traditional route for funding is through the banks that actively support franchises. A good franchisor will have ‘preapproved’ the model and an appropriate funding level will have been offered based on the supplied financial model.

There may be other lending facilities, including asset finance or loan facilities, that sit outside bank funding.

Some franchisors have set up funding arrangements within their companies. This could be in the form of a loan. Some may offer a form of staged payment for the purchase - for example, pay a small deposit, pay nothing further for a year, then pay a monthly payment.

These opportunities are infrequent, but worth consideration. Look carefully at what’s being offered.

Make sure you fully understand why the franchisor has chosen to offer a self-funded option. Mostly, it indicates that the franchisor is comfortable with the model being offered, since it will want to get its money back.

Whichever option is open, franchisees need to ensure it works with their business plan and are advised to look at several funding options before signing the franchise agreement.

Louise Harris is an experienced franchisor, having built and sold an award winning franchise. She’s currently franchise operations manager at Mathnasium UK.