How can you market financing options to potential franchisees?

The right funding strategy for your new business will be one of your most important and difficult challenges. Sufficient working capital is a key aspect of any new and or existing business's financial health. Not having enough operating capital can have a serious impact on the future of your business. In addition, most clients also do not think about an exit strategy. If implemented early, many are not aware of an exceptional and incredible funding vehicle that enables new business owners to set up their businesses to allow them to be exempt from future capital gain taxes when selling a business. This funding program provides life-long wealth protection for you and your family.

In Brazil, different financial institutions have specific credit lines to finance the opening of new franchise units. Normally, the Franchisor's responsibility is to present feasibility studies for new franchised units, as well as real results from other units already in operation. Statistical data on opening, return time on investments and also the number of closed units are important indicators for establishing interest rates and financing terms, in addition, of course, to the credit score of the financing borrower. In addition, some better structured and capitalized franchise networks provide financing for their new franchisees, whether in the form of investments in infrastructure and real estate, as well as product stocks.

I've seen various financing methods including home equity, 401K rollovers, SBA loans, credit card refinancing, and family loans. A key marketing strategy for financing options to franchisees is establishing relationships with funding partners who understand your model and the necessary finance amounts. This ensures we provide tailored, suitable financing solutions. Discussing funding early is vital, as the process can take up to two months. Early conversations set realistic expectations and timelines. By presenting a range of financing options and assisting in the selection process, help franchisees make informed decisions and show our commitment to their success.

This is best done through the franchisor or the franchise broker. Over many years of helping new franchisees evaluate and aquire franchises, I have found that many potential franchisees get much of the information they need through the franchisor. This includes lenders, accountants, and many others.

We are fortunate that there are great resources in the franchise space for funding our candidates seeking franchises. Beyond the home equity lines and stock portfolio loans many candidates already know of, there are SBA guaranteed loans, equipment leases and 401K rollovers. In all of these options, consider the cost of funding, the speed of funding and how or if any repayment is required. SBA loans may be the most widely known options, and a very valid one, but they can take a lot of time to get approved and are usually one of our candidates more expensive options. Least expensive options are usually 401K rollovers (deferred taxes and no penalty to use your 401K with a rollover plan) or the stock portfolio loan. Make good choices!

The best franchise networks have the process of prospecting, selecting and evaluating their franchisee candidates as one of the most important steps for the brand's success. It is not enough to just sell one more unit, or for the candidate to have sufficient resources or credit. It is necessary to find a perfect integration between the franchisee's ideal profile, adherence to the brand's culture and values, entrepreneurial characteristics and, finally, the necessary financial capital. The analyzes must consider the use of financing and its interest rates and terms, results of the units in operation and, a market study for the new unit so that, together with the candidate, they can evaluate the scenarios and viability.

A good franchise provides its franchisees with information and tools to be able to project their business and analyze different options. Know first-hand costs, business needs, investments, construction, equipment, etc. It will allow the franchisee to anticipate various situations and choose where and how they can project their debt.

Given the scale in number of units that a franchise network can have, one of the main capital financing vehicles for the franchisor and its network of franchisees are its suppliers. In this sense, the Franchisor must develop partnerships with its main suppliers of machinery, equipment, products and services, ensuring that the Franchise Network has better cash flow management and wisely manages its capital needs.

In most Franchisee - Franchisor relationships, Franchisor has an edge to strike a better deal with lenders for their Franchisees. The model should be in auto form so that the lenders appreciate the business model and how their investment is safe. A lot of times, individual Franchisees face an uphill task to get funds. They get into a vicious cycle of showing profitability before getting funds. Here's where the Franchisors' brand comes in to help their Franchisees.

As a franchisor, partnering with banks and financial institutions by presenting your brand, the financial projections of the franchises and success stories will allow you to build an attractive business model to attract franchisees, delivering a very attractive value proposition and facilitating the growth of franchisees. Financial projections including interest costs will allow the franchisee to project their investment and returns, future store remodelation and equipment replacements through leasing models.

In Brazil, where high interest rates are often an impediment to the advancement of the economy and entrepreneurship, the Franchise Network that manages to establish advantageous partnerships for itself and its network of suppliers will have a competitive advantage over its competition and , will also have means that enable the composition of capital so that new entrepreneurs can acquire new franchise units. Such facts need to be strategically disclosed, providing clarity and quality information to potential buyers of new units.

Item 10 in a franchisor's Franchise Disclosure Document (FDD) discloses whether the franchisor or its affiliates offers any financing arrangements to franchisees, such as loans, leases, or installment contracts. If they do, they must also provide the material terms and conditions of those arrangements, such as interest rates, fees, collateral, and default consequences. If they do not offer any financing, they must state that clearly in Item 10.

The best reference for a franchise is its own franchisees. The support and accompaniment you provide as a franchisor ensures the success of your franchisee. Ensuring not only the operational but also the financial success of your franchisee will allow them to delve deeper into the business and become interested in becoming a multi-unit franchisee.

The best sales strategy, associated with the best financing options will not be enough to guarantee sales of new franchises if the franchisor does not constantly monitor its sales funnel and also the perfect execution and development of already franchised units. In the end, what helps sell are the testimonials and results from those who have already purchased and are happy with the results they are getting and, with what was delivered versus what was promised,

Na minha opinião é uma das etapas principais "monitorar os resultados de seus esforços, analisar o feedback e a satisfação dos franqueados, identifique os pontos fortes, fracos e oportunidades para ajustes de estratégias"

Capital drives the business world. Securing sufficient capital or a reliable funding source should be Job #1 for any franchisee. Because when it comes right down to it, "Ya' gotta have the money!" The franchisor can introduce prospects to known funding sources, but the lending decision is with the lender...not the franchisor. From my 30 years of experience as a restaurant franchise salesman, the financial issue must be addressed right up front. "Do you have the money or can you get it?" Don't do the whole "dog and pony show" and at the end of the vetting process hear, "I'll do it if I can get the money."

Franchise financing might be complex, and seeking guidance from financial advisors, franchise consultants, and experienced franchisees can provide invaluable insights. These professionals have a wealth of knowledge and experience in navigating the intricacies of franchise financing. They can help you understand the nuances of different financing options, provide guidance on structuring your financial plan, and offer advice on securing the necessary funds. Remember, each franchise venture is unique, and the financing journey may have its own twists and turns. By implementing these strategies, you'll be well on your way to unlocking the funding needed to bring your franchise dreams to life.

Franchising is deemed to be based on a tried and tested successful business model based on processes, market research and profitability. Itnis also backed by training, development and innovation. This gives the franchising an edge over other models giving more peace of mind to the lenders as against a new business without any previous experience . Hence, lending is viable in franchising .