3 Things to Consider When Franchising on a Budget

Author: BeTheBoss.ca

Date: AUG 15th, 2018

Topic: Industry Experts


If you're ready to get your own Canadian franchise but aren't sure whether you can afford the investment, keep reading. It may be possible if you know where to look and what you're up against.

 

The start-up costs 

The initial costs for franchises across Canada vary widely, from around $10,000 to over $1,000,000. One significant factor in cost is whether you need to own or lease physical space for your business. If you're interested in a particular industry but not sold on a brand yet, looking for mobile franchises in that space can help keep costs down.

 

What you're able to afford 

You can't really decide what your investment range will be until you have a complete understanding of your current finances. Determine your net worth - which is a part of some franchisors' requirements - by creating a balance sheet that has all your debts and assets. There is no hard and fast investment rule, but some industry experts believe you should not invest more than 15 percent of your own money into your franchise. 

Unless you are going into a low-cost franchise, it's likely you'll need to get financing. Investment requirements vary by lender, but many will want you to provide 20 to 25 percent of the initial investment. This can guide you through your options. If you have $50,000 you can invest, for example, you can search for franchise opportunities up to $200,000.

 

Your financing options 

If you're got solid credit and collateral, you may be able to get a loan from your local financial institution. Be aware that traditional lenders are more comfortable with established franchises than new and upcoming brands. 

Some franchisors offer financing themselves or have partnerships with lenders in place. Speak to the franchisors you're interested in about any financing options or help they may provide. 

You may be able to borrow money from your retirement accounts to fund your franchise. Before you attempt to do so, however, speak to a financial advisor so you understand all the rules and any penalties or fees that could apply. 

Last but certainly not least, don't forget to think outside the box for funding sources. Family members, friends or even a partner could all provide the money you need to get the ball rolling, even if that means cutting into your profits at first.

Having a limited budget doesn't mean you have to give up on your franchise plans. By identifying your investment range and finding the right means of financing, you can go into business for yourself.