Money money money
If you are selecting a franchise, find out how the price of the franchise has changed over time. If the franchisor has been able to raise their prices then the franchise is becoming more valuable: conversely, a drop in prices could indicate that the business is not taking off. It pays to go through the finances in detail. Look at how much it would cost you to set up a similar business without the support of the franchisor. Could you pay for other professional support with the money you would invest in the franchise? Does the franchisor offer great prices for your stock, due to their large purchasing power?
What funds do you have, what can you afford to invest? Most big banks are used to potential franchisees approaching them for finance. Banks will want to see a business plan with details of your projected finances. The franchise company may have links with banks that have already lent to other franchisees. Look for a bank that has a franchise department as they will have more specialist expertise to help you.
Getting a loan
According to the British Franchise Association, banks may look on a request for a loan to start a franchise slightly more favourably than if you were starting a business alone, possibly offering more money or a lower interest rate. You will need to supply in the region of 40 per cent of the start up capital required, and the bank will loan you the rest. You will also need to have money set aside for your working capital, to cover costs until money starts coming in from customers. Remember to include the monthly costs of the loan, as well as rent, utilities, insurance and franchise fees.