Whether you’re looking to invest in a new or existing franchise, there’s a whole host of options to fund it
There are two ways you can engage with a food franchise concept. You can buy a franchise from the franchisor and start new, or you can buy an existing franchisee out of their existing business. How you fund the purchase is the question which must be answered. Here are nine ways to fund a food franchise.
Are your pockets full and your bank accounts stuffed? If you have the flexibility and cash flow you may want to throw in an all-cash offer. It is definitely a good way to get a franchisor’s attention in a situation where you are competing with others for the same territory.
Small Business Administration (SBA) loans are the most popular loan people will use to buy a food franchise. Most community banks must submit the loan to the SBA for approval. The key question you must ask a bank is if they are SBA preferred and if they do their own underwriting and approval for the loan. If they are SBA preferred and do the underwriting and approval, it will dramatically speed up the process and allow the bank to be flexible in completing the deal.
Working with accredited investors is important as they will likely have additional capital available if needed
There are always investors and angel groups looking for the next big investment. If you are buying into a new and exciting franchise, drumming up interest in investor networks could work well. Negotiating a deal will be the key to partnering with investors. Working with accredited investors is important as they will likely have additional capital available if needed. They could also help in expanding faster if the concept catches on quickly.
There has been an explosion over the last few years in the crowdsourcing industry. The key to any crowd sourcing campaign comes down to planning, strategy, and offering. A strong strategic plan will engage your audience in multiple ways. Also, what are you willing to offer in exchange for an investment? It could be a free beer with a $20 donation or you get to cut to ribbon at the grand opening for a $2,000 donation. Get creative with your offerings and pricing to entice people to participate.
5. SELLER FINANCING
If you buy an existing franchisee out, seller financing is one of the highly preferred methods people use. If it is an existing business, it will speed up the process of the sale. It will also give the buyer some insurance that the seller will stick around for a smooth transition.
Buying into a restaurant concept? Don’t sign on the dotted line without asking these crucial questions, says Andy Moore