Below is an excerpt of an article I wrote for Women Unlimited on how to finance a franchise business.
Banks Will Lend 50-70% Needed to Launch a Franchise Business
by Ursula Barzey, Women Unlimited, 6 January 2009Most franchisors require that their franchisee candidates have a certain level of net worth and liquidity as part of their qualification process. This requirement is in place as bank funding is typically needed to secure some of the money needed to get the business up and running. For example, if opening a retail franchise, a franchisee candidate will need to budget for:
- Franchise Fee
- Opening Cost: Training Course, Operational Manuals, Site Selection, Start-Up Materials, Legal and Management Fees, Build-Out Supervision, etc.
- Initial Marketing Costs
- Store Development Costs: Signage, Equipment, Computers, Fixtures, Displays, etc.
- Initial Inventory
- Other Expenditures: Rent, Security Deposits, Insurance, Licenses, Permits, Staff Advertising, Travel, Accommodations, etc.
- Working Capital: 3 to 6 months
Once you start putting together the budget figures, most franchisee candidates begin to realise that setting up a retail franchise takes more than entrepreneurial verve; it requires a substantial amount of start-up capital to begin with. In fact, according to the 2008 NatWest BFA Franchise Survey, the total start-up cost for a store retail franchise is typically around £160K. The average start-up fee across all franchise operations is £64,900.
To read the article in full, visit the Women Unlimited Internet site.
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