Franchise Funding
Curious about the financial requirements for owning a franchise? It’s likely not as daunting as you imagine. At King and Tribe, our thorough franchise education program ensures you’re well-informed about investment ranges, funding options, and qualification criteria. Partnering with us means receiving expert guidance through each stage, making franchise ownership financially within reach.
Investment Ranges
One prevalent misconception in franchising is the belief that owners must possess hundreds of thousands in cash and a net worth exceeding $1 million. However, this notion is far from accurate. Countless franchise opportunities exist that require only a fraction of those funds. Below, we provide a brief overview of three types of franchises, outlining total investment ranges covering franchise fees and initial startup expenses needed to launch your business.
Brick-And-Mortar/Retail
For this category, the lower end of total investment starts at $250,000 and can vary upwards. Brick-and-mortar franchises in the food industry typically demand a minimum of $350,000, with potential costs surpassing $1 million. Usually, a minimum liquidity of $100,000 is required.
Office-Based
Total investment for this type falls within the range of $100,000 to $300,000, with approximately half of King and Tribe’s partner franchisors falling into this category. Typically, required liquidity ranges between $25,000 and $100,000 for office or territory-based franchises.
Virtual
While less common, this category presents a lower barrier to entry. Franchises operating in a virtual environment typically require investments ranging from $75,000 to $150,000. Depending on the funding option chosen, required liquidity can be as low as $0.
Funding Options
Retirement Rollover (Robs)
If you’re considering using your own funds to invest in a franchise, the ROBS Program, often referred to as a “Retirement Rollover,” could be a suitable option. This program enables you to roll over a portion or the entirety of a qualified 401(k) or IRA to finance a franchise, without incurring the penalties or taxes usually linked with early withdrawals from these accounts. Opting for this route could provide you with the opportunity to enhance returns on your retirement fund.
SBA Loans
The Small Business Administration (SBA) provides several loan options to support franchise funding. SBA loans typically start at around $100,000 and necessitate a cash injection of 20% to 30% of the loan value. Applicants generally need a credit score of at least 700 and a low debt ratio. Upon final approval, these loans are typically funded within 60 to 90 days.
HELOC
Home Equity Lines of Credit (HELOC) enable you to leverage the equity you’ve accrued through homeownership or other real estate assets. This revolving line of credit remains available, and you’re only obligated to repay the amount you utilize.
Cash
Naturally, self-funding your franchise with cash is a viable option. This might involve direct spending from your checking account or liquidating stocks or other assets. With no fees, no interest, and a swift timeline to funding, cash presents an appealing choice for those with the means to leverage it.
Unsecured Lending
Unsecured lending encompasses term loans and business lines of credit, providing a swift route to securing amounts up to approximately $150,000. These loans can be finalized within up to three weeks and do not necessitate collateral. While some may offer an initial 0% interest period, rates could rise thereafter.
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