Franchise Financing Report
Franchisee Financing Case Studies
The following are real world examples of how some franchisees acquired the funding necessary to attain their ownership goal for you to review.
Franchisor Funding
Remi Tessier, a franchisee in Warner Robins, Ga., is someone who has taken advantage of Marco’s Pizza financing options. Initially he thought that it would be easy to obtain financing from a bank based upon a good credit score and his solid track record as a businessman in central Georgia. However, it wasn’t the case. After going through the process with multiple banks, he found the terms and conditions he was presented with to be “outrageous.” That is when he turned to his franchisor for assistance. Eventually, through the leasing program he received $250,000 toward the initial costs of opening the pizza restaurant.
Financing from Family and/or Friends (1)
Several years ago, Stephen Attard was seeking franchise opportunities in the Atlanta, Ga. area while he lived in West Palm Beach, Fla. During the search, he came across opportunities to purchase three different Dunkin’ Donuts locations, but that required coming up with more than $300,000. He reconnected with a former colleague, James Lasarkis, who was already a thriving Dunkin’ Donuts franchisee with several stores to his credit. James decided to help Stephen out and become an investor in the venture. The remainder of the needed capital was secured through bank loans. Stephen and James remain partners in their business venture with nearly 20 stores in their expanding portfolio. Stephen advises potential franchisees to “explore all avenues to obtain financing.”
Financing from Family and/or Friends (2)
When Sandip Patel moved to the United States he was “financially unstable [and] did not want to work for any one.” He wanted to get into the Dunkin’ Donuts franchise business, but before he could think of selling coffee, he had to devise a way to come with the money necessary for the initial investment. That’s when his cousin, already a Dunkin’ Donuts franchisee, came to his aid ultimately loaning him $120,000 to get started, which he made monthly lump sum payments on. In addition, his dad sold some stock shares and loaned Sandip an additional $150,000. With hard work and the support of his family, Sandip’s franchise ambitions have flourished. He now has four Dunkin’ Donuts and four Taco Bell franchises.
Borrowing from friends and family was a solution for Sandip; however, he recommends careful consideration before taking a loan or entering partnership with family or friends. He stresses that he “had proper documentation and everything was in depth. [Up] until today, I [still] have a solid standing relationship with my family.”
Retirement Funds (1)
For Joe Boersma working on his own was something that he had been thinking about for “five-to-six years.” He got that chance when he was laid off from his computer engineering information systems job after 32 years. Originally unsure of what franchise to pursue, he found HouseMaster, an inspection service that offers home owners an objective opinion of their home’s physical condition.
After HouseMaster referred him to FranFund, he decided to finance his franchise by taking advantage of the funds he already had, but were tied up in his retirement account with an IRA rollover retirement plan. He found this way was best for him because he “didn’t have to pay anything of [his] own and it is easier to pay taxes” on. He also avoided the higher interest rates he would incur if he borrowed the money through a lender. Through the IRA/401(k) rollover plan, he was able to create a trust fund for his business which the money from his IRA funded. The process only took a couple of weeks, shorter than he thought. Joe is working his way through the HouseMaster training program and advises potential franchisees to “research the franchisor, see how long they have been in the business; see what they give you for the franchise fees; how they support you during start-up and what demands do they make on you to be profitable or what revenue levels they demand.”
Retirement Funds (2)
For Glenn Burrell franchise ownership gave him to opportunity to retire from the financial-services industry in New Jersey and change careers. “I wanted to own my own business, and franchising was the best way for me,” he says. After several months of searching he ended up in the technology industry as a franchisee of CMIT Solutions, an Information Technology (IT) consulting and computer support services business.
Independently, Glenn researched ways to fund his venture, coming across FranFund as well as BeneTrends, a service provider that helps thousands of entrepreneurs to fund small businesses with qualified retirement plans. After careful consideration, he went with FranFund to assist him in using his 401(k) to fund the franchise. He said chose using his retirement fund as his path to franchise ownership because “instead of investing on other things, I saw an opportunity to invest in myself. I didn’t have to worry about loans, interest, or operating loans. My funding experience was a very easy and obvious choice – rather than other alternatives – because those funds were sitting in my 401(k) plan.” The process of financing his franchise with his retirement funds took Glenn around four-to-six weeks. To others seeking franchise funding, Glenn advises “to make sure you do the due diligence. Research the business model thoroughly. If you can afford to over-fund, especially with a 401K, do so. It’s better than getting cut short.”
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