EXPERT ADVICE: George Knauf | Senior Franchise Business Advisor | FranChoice
You May Not Want Zero Down In-House Financing
Wait, why not? Sounds great. Here’s what franchise companies are up to.
royalties will be paid or scale them up
Over the past 30 years I have seen franchisors offer various forms of financial support to new and existing franchisees.
benefit, but the franchisee still has to cover
The most simple levels of financial support often begin with some form of delayed costs. I have seen franchisors delay when 20 Franchising MAGAZINE USA
across a timeline to give a new franchisee more of the incoming revenue to grow
the business in the market. This is a good
the start up costs. The royalty comes out of ongoing revenue so I would drop this in a category of benefits, not financing.
I have also seen franchise companies
say that after signing they will carve out a portion of the franchise fee paid and
devote it to marketing costs the franchisee has in their market. The franchisee would typically work with the franchise support team to target various forms of marketing that could drive traffic to their location. The costs would then be covered by the franchisor until the benefit is exhausted. Again, that seems to be more of a benefit than it is financing. The challenge with in-house financing is twofold. First, the franchisor is not a bank
