Franchisee Finance

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New Franchisees

You found the franchise that fits your needs and lifestyle.  Now you need financing for your franchise business.  This may be the first business you’ve owned and while the franchisor will provide you some guidance, few will give you the key financial information that you will need to create a realistic business plan.  Why, because Article 19 in the Franchise Disclosure Document by law is very restrictive as to what actual financial information the franchisor can share with you — under certain conditions that information could be construed as “promised” revenues, expenses, and or profits.

Sadly many new franchisees are left to talk to other franchisees and ask them about their financial results.  Unfortunately many times those other franchisees do not see the need for sound financial information and thus the “results” they report to you are often incorrect.

We created a simple, effective, and easy-to-use process that helps a new franchisee to create a business plan that answers a lender’s 5-W’s; Who, What, When, Where and Why.  Our Group researches and writes a unique template for each franchise we work with.  As our client you answer specific questions that are exclusive to you and your location and we insert that into your business plan’s description.

Your financial plan is critical to the lender approving your loan.  If your financial plan does not approximate that of a typical business in your industry (too aggressive or conservative) you will be rejected.  Lenders compare your financial plan to similar businesses in; years in business, revenues, and expenses.

Our Clients use our copyrighted franchise specific EXCEL® based financial planning tool to create their financial plan.  We review our client’s financial plans and make suggestions to improve their plan.  Our process is “educational” aiding our Client to visualize the relationship among revenues, expenses, profits, and cash flows.

We find the lender for you that is excited about doing your loan.  With the Business Plan / Loan Package that we created with your input and the documents you provided, the lender can get answers their questions.  Normally our client will have a Proposal or Commitment Letter from the lender in 8 to 14 business days (it varies from lender to lender).

Multi-Unit Franchisees

            You own 1, 2 or 3 locations and now you’re ready to open additional locations.  “Can I get the financing to open another location?”  “Yes” you can if you meet these simple requirements:

  • Your current locations must have solid financial statements preferably prepared by a CPA.
  • At an absolute minimum your present locations must have a positive cash flow equal to or greater than 130% of your locations current loan and or equipment lease payments.

Cash flow%= (profits+amortization+depreciation divided by total loan payments and or equipment lease payments).

  • You must have in cash between 10% and 25% of the total amount required for the new location. Lenders often allow proven operators to have 10% to 15% cash investment for their 3rd and subsequent locations.

Lenders like to provide financing for your 3rd, 4th, 5th, or “X” location because you have proven that you can make a new business successful.  You’ve demonstrated that you know how to select the correct location, hire and train the right people, do the advertising required, and watch your expenses.

Lenders will be concerned about your span of control.  You’ve proven you are successful but will another location stretch you too thin?  If you have solid managers with industry experience in the existing locations adding locations won’t be a concern for the lenders.

Using the same planning tools and approach described in New Franchisees we will help you prepare the business plan and pro forma financial projections plus gather all of the documents a lender will require, and we will build your Business Plan / Loan Package.  We then find one or more lenders that are excited about doing the loan you are seeking.