How to Fund a Franchise Back
A number of things need to be taken into consideration when deciding upon whether or not to buy a franchise. To maximise your chances of a successful franchise you need time, a strong work ethic and funding.
Working out the costs
The start-up costs of a franchise vary from franchise to franchise. At TFMC for example, the initial franchise fee is £15,000. You can find a breakdown of the set-up fees and costs for a franchise here at The Financial Management Centre here.
You’ll need to ask yourself a few questions whilst considering the costs, such as:
- What contribution can you personally make towards the total costs?
- How much money will you need to borrow?
- Will you need to arrange an overdraft for the everyday operating costs?
- Will you need a loan for the purchasing of fixed assets?
- Can you offer any security to the money you borrow?
- How long will you need to repay the money borrowed?
Once you’ve worked out how much money you would need to borrow, it’s time to assess the profitability factor of the franchise. Would your investment be worthwhile? Will you be able to repay any money you borrow? Is this a beneficial investment?
To answer these, you may want to ask the franchisor (us!) a few questions;
- How much are the initial start-up costs and what does it cover?
- How did you calculate your financial forecasts? They should be based on performance of existing franchisees.
- How much is the monthly management fee?
At TFMC, we’ll help you find funding for your initial start-up costs, via our partnership with Natwest. Once you’ve gathered this information, you should start to put together a business plan that outlines what you hope to do, how much money you need to do it and how you plan to repay the money. You can find help on how to prepare a business plan for a franchise here.
Approaching the bank
When pitching your business to the bank you need to make sure that both yourself and your business plan are well presented. When considering your application, the bank are going to take a number of things into account:
- Repayment Terms
A well-established franchise has more chance of gaining a higher level of funding from the bank, as they will feel more comfortable lending to a company with a proven track record.
Generally, franchisees can borrow up to 70% of the set-up costs. The remainder will have to be sourced from elsewhere, whether that be from your own personal finances or borrowing from family and friends.
To find out more about becoming a franchisee with us, or to discuss any queries you may have, you can arrange a meeting with one of our team or schedule a call. Alternatively, pop your details into the box below and start your journey with The Financial Management Centre today: