How To Buy A Franchise Restaurant With No Money
The good news, though, is that there are financing options out there that help with the financial burden of business ownership. And even better, many of these options have low interest rates and favorable repayment terms, so purchasing a franchise is more affordable. You may even be able to tap into funds that you already have access to.
how to buy a franchise restaurant with no money
There are several types of SBA loans for franchisees, but one of the best is the SBA 7(a) loan. With this loan, you may receive up to $5 million with repayment terms starting at 7 years and going up to 25 years. Funds can be used for a variety of purposes including commercial real estate, equipment, franchise fees, and other startup costs. Interest rates are extremely competitive and are based on the prime rate plus up to 4.75%. Rates are based on the amount and duration of the loan. Learn more about SBA 7(a) loans.
Competitive interest rates, long repayment terms, and flexible use of funds make home equity loans and HELOCs a good choice for covering the costs associated with buying and operating a franchise. On the flip side, though, your personal property is at risk if you default on your loan.
Another way to get the money you need to buy a franchise is by using funds you already have in your retirement account. Normally, drawing from your account early results in penalties. However, you can avoid these penalties and access your funds in just weeks with a Rollovers for Business Startups plan, also known as ROBS.
It's not possible to start a franchise without any money. You'll need to pay an initial franchise fee, and you will have other start-up costs. Furthermore, franchisors want to see that you have some skin in the game in the form of a down payment. Nevertheless, you'll never know if you can start a franchise until you perform research. You might be able to free up some money with a home equity loan or by using your retirement savings. Thoroughly research any franchise that interests you to find out how much money you need to start, and clean up your credit so that you are a strong applicant.
Owning a franchise provides you with brand recognition and an established reputation that can take years to build if you were to start from the ground up. Franchises also offer ongoing support and help ensure you stay competitive. But, to get all of this you generally have to have a large capital investment.
Franchises charge initial fees to get their franchisees started. This can range anywhere from $10,000 to upwards of $100,000. If you are interested in becoming a franchisee, do your research. Look at different options in the hospitality industry to find franchises that start at the lower end of the scale. This will reduce the amount of money you have to invest.
The bank will also look at the franchise that you are wanting to get into to ensure it has a business model that has worked for past franchisees. That means that the better known and more reputable the brand, the more successful you will be with a bank loan.
Some franchisees will turn to home equity loans to help get them started with their new business. To take out a home equity loan, you must owe less on your home than it is worth on the market. This difference is the equity you have on your home.
One of the most appealing reasons to buy a franchise is that you're buying a proven concept rather than starting a business from scratch. The operating details, marketing plan and advertising campaigns all have been developed and tested by the franchisor, and often you can connect with numerous other franchisees to gauge what it takes to be successful.
All that convenience, however, can come with a hefty price tag. To open a Taco Bell or McDonald's franchise, for example, you have to have at least $750,000 in liquid assets. To open a KFC, your net worth has to be at least $1.5 million. The average initial franchise investment is $250,000, excluding real estate, says the IFA, and average royalty fees paid by franchisees range from 3% to 6% of monthly gross sales.
"I have a wife and three kids, so the price was very important to me," he said. For $15,000 Caramusa says he bought "a complete turnkey business." The investment included equipment, training, ongoing support from the franchisor and two accounts to get started. "The financial risk was pretty minimal, so I knew I could make my money back even if I didn't stay with the business," he says.
According to the Franchise Business Review's Franchising@WORK 2019 Employee Engagement & Compensation Report, 90% of corporate franchise employees rated their job as "rewarding & satisfying," with 56% responding "strongly agree" and another 34% responding "agree."
"Franchising is about to experience a significant growth spurt over the next decade," said Stites. "Investing in a franchise business could be a great way for many people to supplement their retirement, especially with some really great, low-cost opportunities available that can provide income, flexibility and long-term equity."
If you love to travel and want to make a living at it, Dream Vacations might be the right franchise. Started in 1991, the home-based travel agency specializes in both land and cruise vacations and counts more than 1,200 franchisees today. Getting started costs $9,800 and includes six days of training at company headquarters in Fort Lauderdale, Florida, website design, invoice and booking software and ongoing support on how to build your business. Alex Greene started her Dream Vacations franchise in Fountain Hills, Arizona, in 2017 without any travel agency experience and is on track to book more than $1 million in sales by the end of this year.
Weddings are a $72-billion-a year industry, and this franchise lets you own a piece of that. For $10,000 franchisees get training and ongoing support to offer brides and grooms help with everything from photographers, DJs, videographers and lighting. Complete Weddings + Events teaches franchisees how to hire these professionals, what to charge and keeps them current on the price of weddings in their area. The company founder, Jerry Maas, was a DJ at the first wedding for Complete Weddings + Events in 1974 and began franchising in 1983.
If you've ever watched HGTV and marveled at all those beautifully decorated homes, Showhomes Home Staging could be the franchise for you. The company takes vacant and other homes for sale and revamps them with temporary furnishings and accessories so that they look neat, clean, and stylish.
Who knew cleaning could be lucrative. Image One is a commercial cleaning service started in 2010. It started franchising the following year and now has 103 franchises across the country. For $15,000, franchisees get training in the proper commercial cleaning methods, equipment, cleaning supplies, billing and paperwork, money collecting, marketing, and on-going support. The company also offers help with obtaining insurance and discounts on additional supplies and equipment.
The final step in purchasing a franchise is opening it! Sometimes the franchisor will help with marketing and promotional materials, but throwing a grand opening is also a great idea to kickstart your business in the community.
A bank or credit union may finance a franchise. While many banks shy away from lending money to a brand new business, franchising may be different. Some banks are eager to make franchise loans, especially to those with good credit who are purchasing a franchise with a solid track record and proven business model.
There are several types of SBA loans. The SBA 7(a) loan program is one of the most popular for franchise financing. This program offers up to $5 million, usually with 10-year repayment periods, however, loans for equipment may extend to 25 years (or useful life) and real estate loans may also extend repayment periods up to 25 years. (The PPP loan program is a type of 7(a) loan.)
You can also expect to provide information about the franchise you are purchasing and you may be required to provide financial projections. (Exact requirements vary depending on the type of financing involved.) Make sure you work with an experienced small business advisor or accounting professional as soon as possible.
It may be possible to buy certain franchises with no upfront payment but if you are able to do so, it will likely be because you have stellar credit and other solid qualifications. You may have to pledge assets such as home equity as collateral. And you are not likely to be able to buy into the best franchises without some kind of down payment.
McDonald's keeps about 82% of the revenue generated by franchisees, compared with only about 16% of the revenue from its company-operated locations. It is the company's goal to have 95% of restaurants franchises and 5% company-owned.
A franchise is a business that is owned by one or more people who provide products or services under the branding and rules set forth by a parent corporation. As a part of ownership, the corporation assists its franchisees with marketing and inventory, charging the franchisee fees in return.
Owning a franchise (or any business, for that matter) can be a large undertaking emotionally, physically and financially. Before you dive into buying a franchise, be confident in your reasoning for wanting to own one. If you think owning a franchise may be easier than owning any other type of business, keep in mind that business ownership in general comes with its challenges.
The cost of owning a franchise varies. Some franchises require franchisees to pay an initial fee, which can range from $10,000 to more than $100,000. Then there are the ongoing marketing and royalty fees, which are often determined by how much money your franchise location makes each month.
Blake Martin, owner and president of FranNet of The Heartland and a local franchise owner with more than 20 years of experience in the franchising industry, described four financing options for franchisees:
As a last resort, you could try to obtain partnerships with other funders, but Martin said most franchises will require any shareholders to sign the franchise agreement as a legally binding commitment. 041b061a72