Analyze the FDD
When it comes to figuring out how much money you will need to invest in your ideal franchise, franchisors provide estimates of fees and startup costs in Items 5 – 7 of their Franchise Disclosure Document (FDD). The FDD provides you with information about the franchisor, the franchise system, and the agreements you will need to sign. The franchisor may also give you data regarding average monthly sales and year-over-year revenue growth. It is important to keep in mind that FDD information is typically average financial data across the entire franchise system, or sometimes only select markets, so some of it may not be applicable to your particular market, which has its own costs for real estate, labor and other factors. We advise you to identify these market variables in order to better estimate the total capital you will need.
Crunch Your Numbers
Once you have a good understanding of the total capital needs of your new business, you can determine how much of the investment you can cover with personal savings, and how much you will need to borrow through other sources (ie. home equity loans, retirement savings, traditional bank loans, etc.). In addition, you should plan to have a cushion of debt-free funds to live on should your business not take off as quickly as you expect. Ideally, it’s a good idea to have at least a year’s worth of living expenses as a backup reserve. Also, be sure to ask about any available discounts. Many franchises offer them for female majority owners, ethnic minorities, or military veterans.
Just like with any business loan, potential funders will look at your credit rating, liquid assets, collateral and experience. The important difference is that lenders understand they are providing funding for a franchise— a brand name business that is backed by a proven model for success. Guidant Financial regularly helps prospective franchisees to fund their franchise. They will help you understand your funding options and develop a personalized solution just for you.
Find a Franchise That Fits Your Budget
It's important that you not over extend yourself financially since doing so lessens your chances of success. The good news is that there is a franchise for every budget as you’ll see while looking at the list of top franchises according to those who know best – the franchisees who own them.