- A franchise is selling an existing firm to a third party to business independently using its logo, name etc.
- The various costs of setting a franchise are Franchise fee, Legal and Accounting fees, Working Capital etc.
- Today, a wide range of options are available to start a franchise
- Business Loan is a suitable financing option for this type of venture
What is a franchise?
A franchise is a special business that is set up by selling the rights, logo, name, and model of a previously existing business entity by its original owners to a third party, called franchisees for operating as an individual enterprise.
The different costs of setting up a franchise are as follows
Franchise fee
It is the price that the franchise has to pay in order to be associated with the goodwill and brand name of the existing company depending on the initial business activity portfolio needed to begin the franchise.
Legal and Accounting Fees
It is the fee paid out to the attorney and the accounting firm to ensure the franchise law is well adhered to and the financial accounts of the business are maintained in order.
Working capital
This one is for incurring the recurrent expenditures of running the franchise.
Build out cost
It includes all the costs of setting up the franchise physically like landscaping, stationary, insurance etc.
Inventory
It includes the stock of goods which is the mainstay of the franchise, around which it works, for example, FMCG products for a stationery shop.
Travel and living
These are the necessary expenses during the business training that’s given by the franchiser to the franchise, often not covered by the former.
The financing options
The different financing avenues available for arranging the finance for setting a franchise are as follows.
Financial institutions
Loans from financial institutions are the best way to fund your franchise against the goodwill of the pre-existing business entity provided your business plan is in order.
Business partners
Finding a partner or a co-franchisee and availing the finance from him on dividing the profit sharing ratio and respective duties is yet another finance option for the franchise business. Alternatively, a venture capitalist or an angel investor will also suffice.
Personal sources
Borrowing the money required from friends, family, and well-wishers on easier terms can also help if one is reluctant on the other sources.
Stock assets
Assets like the stock, bonds, shares and mutual funds which one has invested in can be liquidated to get the money one requires the franchise. A Business loans from Bajaj Finance is the ideal financial avenue to for you to start a franchise. It is a suitable alternative meeting the requirements to continue an established legacy.
Also Read: How To Get Small Business Finance From Bajaj Finserv