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If you’ve been looking for ways to advance your finances and career, you may have begun thinking about buying a franchise. It’s an attractive offer, and it comes with fewer risks than starting your own business from scratch. However, the main hurdle in opening a franchise is securing enough capital to initially acquire it. Here are 6 of the most trending yet time-tested financial tips on how to buy franchise plus additional information to help you get started!
6. Securing capital in a traditional manner
If you’re purchasing your first franchise, then you likely will need to secure extra funds to help you get started. The most traditional route is through your local bank or union, and you can apply for a specialized small-business loan by providing details on the franchise, your plan, plus other personal information.
This personal information differs from bank to bank, with some requiring only your most recent tax returns awhile others request returns from up to 5 years ago. However, your credit rating will definitely be called into question, and it’s worth improving your score before applying. You want as many of your debts lowered as possible before applying, and try your best to keep utilization low on any cards you may have. If you have any past bankruptcies or delinquencies, you’ll need to provide enough information to show that you’re currently stable.
Depending on the institution, you may also apply for a temporarily interest-free credit card that can help with other business expenses during the first year. Of course, this card will likely not finance your franchise entirely, but it can help with unexpected expenses should they occur.
5. Apply for Grants
While grants are usually niche-oriented, they may apply to you or your franchise’s location due to a number of reasons. If the city council believes that your franchise could help raise the property value of a specific neighborhood, they may provide you with a grant to help you get started. These grants do not have to be repaid; however, finding and receiving them can often seem as elusive as a dream.
There are also unique grants available to ethnic minorities, and in some jurisdictions, to women as well. This is to help create an equal economic opportunity for all races, classes, and sexes. Applying for these special grants is generally the same procedure as with a typical grant, but there will be extra paperwork regarding the “special case” application. The U.S. Department of Commerce assists minorities through the Minority Business Development Agency. While grants are never guaranteed, you have more of a chance as a minority to have you plan seen and possibly accepted.
While the government does offer many minority-based grants, private businesses and banks also have programs available to help bring equality in the economy. For instance, if you are Latin American, check with a local group or charter that caters to Latin American workers for more information. Your local city government website may also have information regarding special grants for minorities and women, but this all varies drastically depending on the jurisdiction and can change month to month. However, it is worth seeking out these extra grants if you feel that you qualify as they can help you tremendously to secure finances for your first franchise!
4. Crowd-funded credit
Many websites currently offer crowd-funded credit to those in debt or those wishing to open a business of their own. The process is simple: you create an outline of your plan, state how much you need, and then choose a repayment plan. Then, people from all over the country provide micro-donations to your project, let’s say a dollar each, and then eventually you will repay each person $1.25. These numbers will change depending on the plan and person, but it offers lenders a very low risk while providing you with funds to help you start out.
3. Work with family and friends
While family and friends will likely not invest as much as a bank, they can still provide a way to boost your current capital and provide a safety net as you begin investing. Of course, working with family and friends can be tricky in itself, but first ask if they’d be interested, and then create a plan where they know exactly how much they can earn in a specified amount of time. Remember that you are in charge of this venture, so don’t work with anyone who may become too overbearing.
2. Discussing the deal with the franchise’s company
When offering to purchase, you will be presented with an initial fee that can range from thousands to hundreds of thousands of dollars depending on the franchise’s profit outlook. You will learn of the initial fees during the meeting, and you will discover the level of support that the company will provide for succeeding at your venture. Remember: they want you to succeed just as much you do. Just as your money and time will be on the line, their company name and recognition will be as well.
They will also wish to know about you: your current finances, your previous ventures, and any applicable training, degrees, or experiences that ensure that you can successfully operate their brand. While there is no set-in-stone formula on how to keep their interest, you want to have as much capital ready while also highlighting any and all areas in your life that prove you capable of this obligation. The more you can share about yourself, and the more capital you have, the more likely they will accept your offer.
1. Research your new franchise
You should research and become comfortable with your franchise in multiple ways. Of course, check out the history of the company and ensure that they are in good standing, but also become involved more personally in the company and how it fits your lifestyle. Remember that money is not the only thing that you will invest: time is a major investment and you will be guaranteed to spend a lot of it at first. You want to enjoy and care about the company and its products. This ensures that work remains exciting for you and that you always give 110% to your venture.
To make your investment worthwhile, become familiar with the franchise’s products so that you know where the company stands. Are the items currently trending, or are they time-tested? While trending items may provide a high reward, they also provide a high risk should the trends change. However, a time-tested product such as sandwiches, coffee, and even things like tires will continue to sell. As your first franchise, you want a product that you know will remain popular in at least 5 years.
Final Consideration: How much skill is necessary for your franchise?
Consider the level of skill operating your franchise will require. You can brainstorm this by considering the following points:
- How difficult is training the staff? Will they need to be specialized or can they be trained quickly?
- Has the franchise been around for a while? Are they a long-term player or a new creation?
- Is the area ripe with a strong local economy? Is it an area that needs a few more years to fully develop?
Generally, you want a staff that can be trained quickly so that you can begin hiring immediately. This also ensures that you can quickly replace staff if need be. If the franchise has been around for a while, then you at least know that the head staff is competent and knows how to advance the business. This will protect you against incompetent CEOs and against flash-in-the-pan ventures. Finally, you want the local area to be welcoming towards new economic activity. Consider: will the given product be sought after in this area, and do the resident’s have the income to continually purchase this product?
If you’d like to know more about opening your first franchise, contact Nardelli’s franchise specialists today. With over 85 years of experience in the industry, you will be provided a time-tested template for successfully running a new franchise purchase. With on-call assistants ready to help, a Nardelli’s franchise is a great first choice for those looking to expand and advance their financial career!