Buying a Franchise: The Real Deal

So, you’re thinking about buying a franchise? Maybe you’re dreaming of a spa, staging homes, or providing next-level IV drips to dehydrated overachievers. Whatever your franchising fantasy, it’s time to talk about the one thing nobody can avoid: money.

A lot of folks assume buying a franchise means handing over a suitcase full of cash like you’re in a 90's action movie. (Spoiler alert: it doesn’t.) The truth is, the majority of franchises are financed. Financing isn’t just an option; it’s the norm. Let’s break it down so you can stop worrying about raiding your piggy bank.

What Do You Actually Need to Pay Upfront?

While financing covers the bulk of the cost, there are still a few upfront expenses you’ll need to tackle. Here’s the basic lowdown:

1. Franchise Fee: This is the golden ticket to join the brand’s franchise family. Think of it as the entry fee to your new business adventure.
2. Travel Costs for Training: Most franchisors require you to attend training at their headquarters or a designated location.
3. Legal Evaluation Costs: You’ll want a FRANCHISE Lawyer to give the Franchise Agreement a thorough once-over. Trust us, this is not the time to DIY.

Depending on the franchise, it may be more, it may be less. A good rule of thumb? Plan to cover 20-30% of the total franchise cost out of pocket. Before someone says, "It’s more than that!" Possibly, but let’s not carve it in stone just yet. The rest? That’s where financing steps in to save the day.

TIP: Ask the Franchise Developer to walk you through the start-up costs, a.k.a. the "Item 7" along with a start-up cash flow calendar.

ANOTHER TIP: If a Franchise Developer is not able to show you a start-up cash flow calendar, it’s time to move on. Seriously, if they can’t map out your cash flow, what else are they winging?

YET ANOTHER TIP: If the high-end number in Item 7 is higher than their required Net Worth, consider other options—it’s obvious the lights are on, but nobody’s steering the ship.

Show Me the Money (Financing Options Galore)

Here’s the best part: there are so many ways to finance a franchise that it’s almost silly. Franchise lenders specialize in helping folks like you find the least expensive and most efficient way to fund your dream. Whether it’s a traditional loan, an SBA loan, or leveraging your retirement funds (hello, ROBS program), options abound.

The key? Work with a lender who prioritizes your bottom line. We’re talking about keeping more money in your pockets and avoiding sky-high interest rates. After all, the goal is to fund your future, not drain it.

Liquidity, Net Worth, and Other Magic Numbers

Most franchisors will tell you exactly what they’re looking for in terms of Liquidity and Net Worth. These are the numbers you need to hit to qualify.

TIP: Stick to these guidelines. Don’t overcommit yourself trying to swing for the fences. Franchising is about building a sustainable business, not setting up a financial house of cards.

The Bottom Line (and a Little Tough Love)

Here’s the truth bomb: there’s no such thing as a franchise with "nothing down." If someone promises you that, run in the opposite direction. Starting a franchise requires an investment of time, energy, and yes, money. But with the right planning and financing, it’s absolutely doable.

So, if you’ve got 20-30% ready to invest, a solid credit profile, and a willingness to roll up your sleeves, franchising might just be the ticket to your entrepreneurial dreams.

Remember: it’s not about breaking the bank—it’s about building a future. Let’s get you financed and on the road to success. Cheers to keeping more of your hard-earned cash where it belongs: in your wallet.