Franchising with Financial Partners

Franchising with Financial Partners

Previously, we discussed franchising without any financial partners. Today we look at ways for entrepreneurs without their own capital resources to get into the game.

Lack of available capital has always plagued small businesses, especially start-ups, forcing them to turn to alternative sources of funding. Only a few short years ago, aspiring franchisees could use their savings, retirement plans, home equity, or any of several over-friendly banks and lending institutions to finance their dreams. But the Great Recession put the squeeze on those assets, causing many to look beyond their own means in search of financial partners.

Many kinds of potential financial partners are available to choose from. However, all come with a price. Ideally, a silent partner, content to invest in you and your franchise and "leave the driving to you" would be the perfect find. While this does happen, don’t hold your breath.

And no matter what type of partner you take on (silent, family, friends, private equity, angel investor) you first must decide how much control, if any, you are willing to give up. For many, it comes down to a matter of personal style; some people work better on their own, no matter how hard they may try to do otherwise.

Depending on the type of partner you take on, it’s always best to "hope for the best and plan for the worst." One of the most typical pitfalls in entering a partnership is not taking care of the second part of that aphorism. Experts on partnerships always advise parties to sign a pre-nup, i.e., a partnership agreement that clearly spells out, in writing, an exit strategy in case things don’t work out as planned (or hoped for).

"The worst" can include struggles for control, strategy, or direction; an unclear division of responsibilities leading to conflicts; pressures from family and friends; one partner discovering that what seemed like a great idea at the time wasn’t what they thought it would be; unexpected external events or business conditions that delay profitability, or worse, result in red ink; and human factors such as marriages, relocations, an unexpected medical condition, even an untimely death. Well, you get the idea: what can go wrong actually may.

If you don’t have the capital or ability to borrow the money you need for the franchise fee and all the costs associated with starting a business and keeping it afloat until it turns a profit (which can take from 6 months to 3 years), a partner may be just what the doctor ordered, even with all the tradeoffs that brings.

After all, if you’re longing to be your own boss in a field of your own choosing, it’s better to get into the business you love, partner (or partners) and all, rather than chafe away for years at a job you hate, wondering "What if?" There’s that old franchise saying: "Making it on your own doesn’t mean making it by yourself."

Finally, the entrepreneur’s passionate desire for financial independence can overcome the drawbacks of giving up some level of autonomy, at least at the outset. Besides, you can always buy out your partner later, but be sure to put it in writing!

Published: March 30th, 2018

Share this Feature

Recommended Reading:

Comments:

comments powered by Disqus
Golden Corral
SPONSORED CONTENT

FRANCHISE TOPICS

Featured Opportunities

Elements Massage
When simplicity is the essence of your business model, clients and owners benefit. Clients want a predictably wonderful experience with every visit....
Anytime Fitness
Align with the world leader in fitness. Recurring-revenue business model, multi-club ownership potential. Don’t just join a franchise, join a...
Tony Roma's
After two decades of fast-paced international expansion, we are introducing a new generation of domestic customers to the Tony Roma’s experience....
Red Mango
Based in Dallas and with more than 300 locations across the U.S., Mexico, El Salvador and Uruguay, Red Mango is a rapidly-expanding retailer of...
Launch Trampoline Park
Launch Trampoline Park is an indoor sports and entertainment facility featuring interconnected trampolines that form a giant jumping surface. Our...

Multi-Unit Franchisee Magazine

The only publication dedicated exclusively to the hottest topic in franchising - Multi-Unit and Multi-Brand Franchisees.


Share This Page

Subscribe to Franchising.com Express

A Franchise Update Media Production
Franchise Update Media
P.O. Box 20547
San Jose, CA 95160
PH. (408) 402-5681
In Loving Memory Of Timothy Gardner (1987-2014)

Copyright © 2001 - 2018.
All Rights Reserved.