A franchise’s success depends on the financial health of its franchisees. Here’s how franchisors can help franchisees secure the funding they need by working with a financing specialist.
FDD Transparency Provides Clarity
- Fees should be clearly identified in Item 5 & 6. Item 7 should detail the project cost range including construction, FF&E and pre-opening expenses. Excluding expenses from the range can be misleading and cause insufficient funding.
- The financial performance history in Item 19 is helpful for franchisees and lenders in preparing and evaluating financing projections. Outlets entering and existing the system in Item 20 speaks to the success of the system, and a narrative related to terminations, non-renewals, acquisitions and ceased operations can help mitigate a hiccup.
- Getting granular in Item 11 on what training and support a franchisee will receive helps franchisees and lenders value the benefit of the franchise model.
- Business Experience in Item 2 should detail the franchisor’s officer’s experience within the brand, other brands and related experience to their position. Lenders for officers of the company in Item 2 Financial transparency with franchisees, including cost breakdowns and projected performance data, can streamline financing approvals and improve franchisee success rates.
Partnering with Financing Experts
- Collaborating with financing experts, like me, who understand franchise financing requirements can help franchisees secure funds faster and more easily. A close partnership between franchisors and financing specialists can ensure franchisees receive accurate guidance through the financing process.
Offering Guidance on Business Planning
- Providing franchisees with templates or resources to create a strong business plan and financial projections is invaluable. These templates can save franchisees considerable time in business plan prep, financial projections (and assumptions) and total project cost estimates.
Ensuring Transparency in Costs and Fees
- Franchisees and lenders alike appreciate clear information about both initial and ongoing costs. Transparent financials reduce misunderstandings and help franchisees secure funding more effectively.
Conclusion
By actively supporting franchisees in the financing process, franchisors can improve their network’s financial stability and set up new franchisees for long-term success. A strong franchisor-specialist relationship benefits both parties and encourages growth within the brand.
Looking to strengthen your franchise network with reliable financing options? Let’s discuss how my expertise can support your franchisees and help them succeed. Contact me to build a collaborative approach to financing that benefits your entire brand.”