Tips For Buying A Franchise

When looking at a franchising opportunity to invest in, understanding how much money you need to have upfront and what different types of loans are available to you make a world of difference. In looking at different investment opportunities, candidates will soon discover that the options for gaining access to capital greatly varies. 1851 Franchise connected with three franchise development executives representing brands at different financial entry points to give you a better understanding of just exactly what type of financing is available to franchise candidates.

Below, you&rsquo;ll see what Philip Schram, the Chief Development Officer of <a href="http://ownabuffalo.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">Buffalo Wings &amp; Rings</a>; Eric Little, the Chief Development Officer of <a href="http://www.rightathomefranchise.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">Right at Home</a>; and Eric Steward, the Marketing Manager for Franchise Recruitment at <a href="http://www.pillartopostfranchise.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">Pillar to Post</a> have to say.

The average start-up cost for a Pillar to Post Home Inspectors Franchise costs $32,100, and the company will finance up to $9,000 in-house on approved credit. Steward comments that this frees up a little bit of the need to have everything up front for the candidates. They cut the franchise fee and changed the model in 2009 to bring in more prospects.

&ldquo;Our focus is to find people who we think can be successful in our franchise,&rdquo; said Steward.

The company does not have a net worth requirement, but the franchise fee of $18,900 is due up front, and candidates need to have enough liquid capital to launch the business.

&ldquo;Early on, we talk about money in very general terms. On our first or second call, we say that our business requires a $30,000 to $40,000 investment and ask if that is within the means that they&rsquo;re considering,&rdquo; said Steward. &ldquo;At that point, we want to make sure that you&rsquo;re not wasting time. We want to make sure if we&rsquo;re a viable option for you and to figure that out early. If your answer is &lsquo;yes&rsquo; to that question, that&rsquo;s all we need at that point.&rdquo;

If candidates need more than $9,000, Pillar to Post works with two companies that are small business financial partners that work in the franchising space; however, Steward commends that most people end up coming to the table with the $30,000 to $40,000, or will use the in-house financing option if they need back-up.

&ldquo;One of the interesting things about our business is that it is a very simple business. It is not an easy business; you have to put the work and effort in, but when you look at some of the restaurants and concepts that you have to put in a ton of money and then peak times are Friday and Saturday night, does it really provide the lifestyle that you want?&rdquo; he said.

The company actually cut their franchise fee in hopes to target younger candidates. &ldquo;Our goal is not to turn someone down because they&rsquo;re not financially viable,&rdquo; said Steward. &ldquo;Because we chose not to profit off the franchise fee and lowered it, we&rsquo;re now working with people earlier in their careers who are great candidates and run great businesses.&rdquo;

A medium investment&nbsp;is <a href="http://rightathome.1851franchise.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">Right at Home</a>, a leading international senior care company that has been named by <a href="https://www.forbes.com/pictures/gjim45jlk/right-at-home/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423#46f8baa65264" target="_blank" rel="nofollow" target="_blank">Forbes</a> multiple times as a top franchise opportunity. The total initial investment ranges from $74,700 to $126,100.

CDO Eric Little discusses their process to speak with candidates about financing options. They discuss it a couple of different times, but first and foremost, they discuss the requirements in the initial phone call.

&ldquo;We talk about our requirements for approval, and then we ask them if they&rsquo;re comfortable with that level investment,&rdquo; he said. &ldquo;If they want to go further in the process and we get them the FDD, we talk about money again on the next call. We need to fully understand who you are, where you&rsquo;re coming from, and your financial situation. We ask which of these assets will you liquidate, &lsquo;how will you pay the franchise fee?&rsquo; In order for us to do our jobs well, we have to ask the questions up front.&rdquo;

Unlike Pillar to Post, Right at Home does not offer internal financing, but they do offer a variety of different options to help support candidates with the process.

Little notes that Right at Home has quite a few people who do the 401K or IRA rollover, so they work quite a bit with <a href="http://www.franfund.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">FranFund</a> and <a href="https://www.benetrends.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">Benetrends</a>. Lately, he has also seen a few more FBA deals coming through, which is a new trend for the brand. Like Pillar to Post, Right at Home also does not have a net worth requirement.

The minimum requirement to be considered for approval for a Right at Home franchise is to have $150,000 in cash or available to the candidate by rolling their retirement fund, from equity in their house or getting a loan. They also need to have 12 months of personal living expenses. This can be excess savings, it can be a spouse that will continue to provide for the family and can continue to cover living expenses, or sometimes living expenses aren&rsquo;t fully covered by spouse, but they just have to be able to make up the rest from savings.

&ldquo;Franchisees looking at different opportunities should really look at the investment level, how much they have in excess, and how much they&rsquo;re willing to risk,&rdquo; said Little. &ldquo;The level of risk they&rsquo;re interested in will help put you in the right state of mind. When making an investment, you have to ask what are you buying? For example, Right at Home isn&rsquo;t an investment in products, heavy equipment that could break, or a large plot of land that requires a location build out. If the opportunity doesn&rsquo;t have a lot of assets on the front end, that lowers the investment, and when selling, the valuation is really based on the performance of the business.&rdquo;

With that being said, owning a large restaurant can also pay off through your franchise&rsquo;s revenue. Owning a Buffalo Wings &amp; Rings will cost $1.2MM to $1.8MM, with varying increases depending on the actual build out and real estate investment.

&ldquo;If you go to <a href="http://ownabuffalo.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">www.ownabuffalo.com</a>, you will immediately see our financial requirements,&rdquo; Schram said. &ldquo;It is the first question on our website, and we discuss it on our first call to validate the candidate and make sure they understand. &nbsp;If someone contacts us without meeting the right requirements, it might be too early in their lives to become a franchisee, but five years down the road, they might meet the requirement.&rdquo;

Buffalo Wings &amp; Rings uses <a href="http://www.boefly.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs-12423" target="_blank" rel="nofollow" target="_blank">BoeFly</a> to complete free pre-qualifications within 24 hours of inquiring, and the company also utilizes a broker lender who works individually with candidates and a large network of lenders.

&ldquo;The best thing that we can do for our franchisees is to provide guidance. The more that we know the guidelines and can communicate that clearly with the candidates, the better it will be,&rdquo; said Schram. &ldquo;Typically, we work with community banks so the local franchisee will work with their local bank. The beauty of the broker lender is that they&rsquo;re in touch with a lot of lenders, so because they&rsquo;re well connected, they put the right prospect in touch with the right lender.&rdquo;

Schram mentions that there are five rules to lending. The first is that you need to have net worth equal to the borrowed amount of money that you&rsquo;re looking to attain. The second is that you need to have one third of the cash to bring to the table. The third rule is that you need to have a credit score at 720 and above. The fourth rule is that you hold relevant experience, and the fifth rule is that the household cannot rely on the income of the franchise for one to two years. Just like Right at Home&rsquo;s requirement, if your spouse is working and making enough income to support the family, that is fine, but the household needs to live without the income from the business.

Once a franchisee proves him or herself as a success, Schram elaborates that it is much easier to get loans for second and third locations, and franchisees actually need less up front because the cash flow is consistent and the franchisee has already proven themselves as a success.

Prospects looking at Buffalo Wings &amp; Rings get a full look into what the financials at their location will look like by compiling a business plan for the lender and corporate team. Schram comments that when they put together the budget with all the income and all the expenses the business entails, they really understand what the business is about because they have to write down their own numbers.

&ldquo;Remember when you were starting to drive, you were in the passenger seat and your parents were driving and they were explaining the process to you,&rdquo; said Schram. &ldquo;Then, you switch seats when you start to drive. Now you adjust the mirror and start to move the car, and it is more difficult than what you thought. With the business plan, at the beginning, you don&rsquo;t really know the numbers, but then you ask questions, then you become more familiar, then you gain confidence, then you speak with three or four franchisees and now you start to get it.&rdquo;

No matter what price range you&rsquo;re comfortable with, one thing is for certain: franchising comes with guidance and support to help you through the process.

&nbsp;

How Financing for Low, Medium and High Investment Franchise Opportunities Differs

1851 Franchise

From broker lenders to internal financing, options greatly vary depending on the brand.

This brand page has been paid for by TIPS FOR BUYING A FRANCHISE. Content within this page that is paid will showcase a Sponsored icon. This means the brand has engaged 1851 FRANCHISE to write the content. Content without the Sponsored Icon is aggregated media placements the brand earned. Questions can be sent to editorial@1851franchise.com

how-financing-for-low-medium-and-high-investment-franchise-opportunities-differs

FRANCHISE INFORMATION

None

Chapter 1: The Franchising Business Model

Chapter 2: Should You Be a Franchisee?

Chapter 3: Finding the Right Opportunity

Chapter 4: Selecting a Franchise

Chapter 5: The FDD

Chapter 6: Potential Earnings

Learn

Visit Website

TIPS FOR BUYING A FRANCHISE

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5 CHAPTERS

TIPS FOR BUYING A FRANCHISE MOST READ STORIES

1851 LOGIN

GROWTH CLUB LOGIN

ABOUT TIPS FOR BUYING A FRANCHISE

How to Know if an Earnings Claim is Typical

how-to-know-if-an-earnings-claim-is-typical

Understanding Financial Performance Representations and Their Legal Ramifications

understanding-financial-performance-representations-and-their-legal-ramifications

How a Franchisee Background Influences Investment and Potential Earnings

how-a-franchisee-background-influences-investment-and-potential-earnings

How Franchisees Can Evaluate Their Future Net Profits

how-franchisees-can-evaluate-their-future-net-profits

How Financing for Low, Medium and High Investment Franchise Opportunities Differs

MORE STORIES LIKE THIS