Financing for Multi-Unit Franchising

The franchise business model has been around for at least the past 80 years – a very successful way to bring the same services and goods to people across large areas. In the last decade or so, a new trend has emerged in the franchise world, with the owner of one franchise opening up several more branches, become a multi-unit operator. In fact, a study from FRANdata reports that since 2005 more than half of all franchised units are operated by multi-unit franchisees.
The Benefits
Why the eagerness for many to operate several franchises at the same time? The opportunity for profit. Often buyers can get a discounted rate when buying multiple franchises and having more than one insulates the operators to a degree from the risk associated with opening a single franchise. If one fails you still have at least one other that has the potential to succeed and provide the needed income.
Securing the Funding
Of course financing a multi-unit franchise business will require more cash up front. In some cases, where the brand is well known for its success, franchisees can turn to investors who have already poured money into similar branches elsewhere. More often than not, however, operators must secure their own funding from lenders or other sources. Small business loans guaranteed by the SBA are a popular choice but local lenders can also offer attractive loan packages. Either way, this will require a major financial background check for the franchisee. If an operator already owns one franchise, lenders will want to see that it is performing strongly. Borrowers will need to show how the addition of the extra franchises will produce a greater ROI (return on investment) and increase the value of the assets included.
With a bit of financial legwork, franchisees looking to expand and become multi-unit operators can get the needed funding and realize their dreams.