Franchise owners typically face upfront costs such as franchise fees, buildout expenses, and initial inventory or equipment when opening a new location, in addition to the day-to-day working capital needed to run the business. Multi-unit operators may face these costs repeatedly as they expand.
Because franchise agreements often come with specific brand standards for buildouts and equipment, financing may need to be structured around those requirements as well as the franchisee's overall business plan and financial history.
Common cash-flow challenges
Upfront franchise and buildout costs, ongoing royalty payments, and the working capital needed to reach stable operations can create cash-flow pressure for new and growing franchisees.
Typical operating expenses
- Franchise fees and royalties
- Buildout and leasehold improvements
- Equipment and fixtures required by the franchisor
- Staff wages
- Marketing fund contributions
Growth and equipment needs
Opening additional units or refreshing an existing location's equipment and interior are common growth investments for franchise owners.
Real estate and expansion
Some franchisees purchase or build the real estate for their location, which may be financed separately from the business's operating costs.
Financing options that may fit
- SBA financing for franchise acquisition and startup costs
- Equipment financing for required fixtures and equipment
- Commercial real estate financing for owned locations
- Business lines of credit for ongoing working capital