FINANCING OPTIONS FOR NEW FRANCHISORS

Financing options for new franchisors are limited. New franchise companies have few tangible assets and are threefore often unable to obtain debt financing from banks. Venture capital from private equity firms is hard for a young franchisor to attract and is expensive financing in any case. Fortunately the basic premise of the franchise model is to finance growth with franchisees’ capital -- not with the franchisor’s. Nonetheless new franchisors need seed money to pay for the creation of operations manuals, training and marketing programs, franchise agreements and FDDs. And they need working capital to finance franchise sales and operations staff activities.

Creative Equity Financing
This often leaves franchise company founders to rely on their own resources and investment from friends, family and acquaintances. For this reason, structuring the corporate entity for the franchise company is critically important. Creative solutions to structuring the relationship between the founder and other investors is a sensitive and important task.

Call on us to

  • Draft an Operating Agreement for your LLC
  • Structure the voting rights and economic interests of your investors
  • Treat your investors fairly while preserving the founder’s control
  • Protect your eventual exit strategy

Whether you need assistance

  • Finding debt or equity financing;
  • Closing loan transactions;
  • Documenting arrangements with your investors

The Franchise Law Source is ready to serve your needs. Years of experience in negotiating and closing corporate financing transactions and hands-on experience running a franchise company make Scott Kern, uniquely qualified to help you sort through your options and close your financing transactions. Our attorneys are franchise business people, first, and attorneys second.

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