Most individuals that come into franchise companies have to pull financing from various sources. They aren’t all people with the startup costs just lying around underneath their mattresses, waiting for a worthy cause to invest in. There are a number of places franchisees will look for financing and you, the franchisor, may be one of them.
Whether you are prepared to financially support individual prospects or not, you should have a list of places to refer them to. You should have different options from private loans to suggestions for grants or where to look for grants for specific people. The U.S. Small Business Administration is a great starting point for most in the franchise industry to seek financial assistance. Whether they are owners of franchise locations or franchise companies as a whole.
The U.S. Small Business Administration offers loans and financing for major assets such as buildings and land, which can be some of the biggest blocks at your franchisees startup. Franchise companies and franchisees can also receive free business advice through the Small Business Development Centers in universities around the United States.
You may not find it is important or your job to provide your franchisees with sources for financing, however, helping your franchisees along with financing sources can help expedite the process of opening a location. It will also show your willingness to work with your franchisees, the support you offer, and build a stronger bond of loyalty between your franchisee and franchise companies.
Franchise companies are not banks. There’s nothing wrong with helping out your franchisees when you can if you offer financing, However, don’t make it your main business and you shouldn’t get comfortable with doing it every time for every franchisee. It can become a huge source of financial loss if you lose franchisees. Financially supporting one new location is tough, so what about five? Ten? More? Having sources or references for financial support is good enough for most franchising companies.
Facing Startup as a Franchise
As you begin your adventure into operating franchise companies, you’re going to want to place locations that are easy for you to get to. Depending on your own personal financial security, you may not have the money to fly across the country time and time again in order to assist with any problems that come with building a new franchise. If you haven’t added locations before, you may not be prepared for complications that arise during the startup process. For your first handful of franchises, you may also discover that you want to be nearby during the process to document what happens, what problems you face, and how to best prepare for them in future endeavors.
Opening locations for your franchise companies that are nearby allows you to stay in a market that you know, lend your support as needed, and have a better idea of the real estate and customer base available. If you’re thinking of branching out farther from home from the start, consider meeting with your franchise consultants ahead of time to see how they feel based on the resources you have available. In business ownership, a poor location can destroy another wise amazing location. Don’t let your first time branching out turn you into a victim of this all too common mistake. You may not be able to afford the failure.
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