Franchise

Debt capital sources for franchise system financing

With franchise concepts, the franchisors have very different financial starting conditions. If the franchisor is a large industrial company, the question of expansion financing is unlikely to arise. However, if the franchisor is still a relatively young company, the successful market establishment of the franchise system cannot usually be accomplished without outside capital.

As a franchisor, financing via the bank, including the integration of subsidies, is in principle possible. But the three factors of a young company, namely the lack of security and the difficult to describe economic perspective as a franchisor, make the path to classical debt financing considerably more difficult. There it is obvious to examine alternative financing models or to look for an investor.

Do alternative financing models also make sense for franchisors?

In any case, they are, because considerable capital is required to quickly establish a franchise system on the market. In advance, a few basic questions need to be clarified and various tasks need to be completed, because the same rules apply to all alternative financing models.

First of all, the company as franchisor must present a detailed plan. From the business planning, the franchise strategy must be explained with realistic milestones just as precisely as the intended use of the requested capital.

The second general rule is to determine your own starting position. Investors generally think in terms of investment phases, whereby the individual phases can vary in length depending on the initial situation.

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