What are Today’s Franchisees Paying for?
Anyone who’s considering franchise ownership has “thoughts” about the money required to get started.
“How am I going to come up with the money I need to buy the franchise I’m interested in?”
or even …
“Will I be able to secure a small business loan from a bank?”
These are important questions. But there’s another question every prospective franchise owner needs to ask. It’s the “investment vs. value” question.
“If I become a franchise owner, what do I get for the money I am investing?”
Where Does your Initial Investment in a Franchise Go?
Let’s consider the commercial cleaning and facilities services franchise, OpenWorks. The company has a Standard Franchise Package that starts with a low initial investment of $24,850.
When examining any franchise opportunity, you need to ask, where does this money go? In the OpenWorks example, it covers
- A Franchise Fee that covers administrative support, sales, and marketing
- Franchise owner training and ongoing business service support
- Initial cleaning supplies and equipment to get started
In essence, your initial investment in a franchise provides (and should provide) everything you need to start your business.
And in the case of the OpenWorks facilities management franchise opportunity, there’s an important add-on that’s not seen much in franchising these days: Guaranteed cleaning contracts.
You read it correctly. OpenWorks provides “guaranteed cleaning contracts” as part of the deal every franchise owner gets when they partner with OpenWorks. This means you don’t have to worry about acquiring customers on your own – you can focus on the operations of your business.
Which, when you think about it, is something that should enable you to sleep much better at night if you decide to become an OpenWorks franchisee. There’s just one little hurdle in your way.
You need money to start an OpenWorks franchise…Keep reading.
Is There a Way for you to Finance Part of your Investment?
If you find yourself in the enviable position of being able to write a check for your entire initial investment for a franchise, securing financing probably isn’t on your radar.
But if you’re like most people who are looking to take more control of their lives by owning a business, getting the money to go after your dream is top of mind.
Given that, let’s go over some ways to get that money, so you can start working for yourself...instead of someone else.
Franchise Financing Options
There are several ways to finance a franchise.
1. Secure a small business loan. These loans are available through your local bank and business lenders. In a nutshell, this involves applying for a small business loan. To find a small business lender near you, head over to the U.S. Small Business Administration’s (SBA) website for a list of SBA lenders. Once you find one lender, you’ll need to be prepared with a personal financial statement, a well-thought-out business plan, and a good deal of information about the franchise business you want to open. OpenWorks does recommend franchisees work with local SBA Small Business Development Centers in their area for guidance on business planning and long-term strategy for getting their business certified as DBE status.
2. Ask a family member for help. No one wants to ask family for money, and it can be rather awkward. But, why? Because you’re asking someone close to you to “trust” you and to trust your business sense. The good news is that entrepreneurs get loans from their relatives all the time. Given that, if you decide to go that route, you’ll want to use these helpful tips on how to ask for money from your family in the least painful way possible.
3. Use a portion of your retirement plan (401K/IRA). Using retirement savings could be a bit risky. If you pull money out of your retirement plan prior to the actual age of retirement as mandated by the US government (about 66-67), you will have to pay taxes on that money. You could also pay early withdrawal penalties.
4. Crowdfunding. Ask friends, acquaintances, and strangers online to help fund you. Yeah, file this under the above “awkward” category. Don’t despair. There is another way.
5. In-House Franchise Financing. Did you know that some franchise companies (hint, hint) offer in-house franchise business financing? If the franchisor you’re interested in partnering with has an established financing program, it’s definitely worth a look. That’s because their finance rates are usually reasonable, plus dealing directly with the franchisor saves a ton of time and paperwork
OpenWorks Franchise Financing Program
If you decide to start an OpenWorks franchise business in your local area, chances are, you’ll be able to take advantage of their own, in-house financing program.
In this case, OpenWorks allows you to finance the franchise fee portion of your upfront investment. Here’s how that works:
- Say you decide to become a franchise owner and invest in the OpenWorks Standard Franchise Package.
- If that were the case, you’d be able to finance $10,000 of the $24,850 total upfront investment (provided you qualify).
- So instead of having to come up with $24,850, you’d only have to come up with $14,850, as the rest is financed through OpenWorks.
To wrap things up, if you decide to become a franchise owner, today’s franchisors provide the tools you need to succeed.
And when it comes to the money part, you just learned that some franchisors (like OpenWorks), offer their franchisees in-house financing, so they can get into business quickly and start going after their dreams
This article was written by The Franchise King®, Joel Libava. He’s a 20+ year industry veteran, the author of two helpful books on how to buy and research franchises, and a Franchise Ownership Advisor.
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