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Franchise Prospector » Money & Financing
Financing Your Fast Food Franchise
You've decided to invest in a fast food franchise. You've done your research and made a decision on the franchise. Now how do you get the funding you need to get started?
The initial investment for a fast food franchise will vary depending on the franchise you've chosen. Though each business charges its franchisees differently, you can still count on each fast food franchise to have a start up fee to get your business off the ground. Where do you get your initial capital?
The Challenges of Getting Funding
Getting around obstacles in financing your fast food business will require patience, diligence, and excellent organizational skills. Here are a few things that will make a big difference in finding the financing you need for your franchise:
- Good credit - it doesn't have to be perfect, but you must demonstrate a good payment history on your personal debts.
- A solid business plan - lenders want to see that you are organized and ready to start your own business.
- Location - not all banks or lenders will require this, but a prime location for your fast food franchise can help.
- Management experience - many lenders will want to see that you have experience managing a business.
- Personal capital - very few lenders will be willing to offer you 100% financing for your franchise.
Dollars and Sense
According to Bond's Franchise Guide, the average initial franchise fee for fast food franchises is about $23,000 and the average total investment is about $401,000. In order to qualify for a loan, you will need to put some of your own money on the table. Many now in fast food franchising tapped into their savings accounts, IRA, and 401(k) accounts to get started. Others went to friends and family for personal loans to help with the initial business investment.
Once you have secured your own personal funds, but these or other means, try the following routes for additional funding:
- Your franchisor - they'll understand the business better than anyone. They should also have an idea of your geography and might have relationships with banks or finance companies in your area.
- Local banks - start with the bank you use for your personal business. Your existing accounts, such as home or car loans, could help you.
- Franchise lenders - franchise lenders are familiar with investing in a franchise business. In this case your franchise brand could help a great deal.
- Small business lenders - look for financial institutions that make loans through the Small Business Administration program. These could be lenders, community development organizations, or microlending institutions.
Investing in a fast food franchise is an excellent way to start your business. Look online for success stories to see what others have done to get started. Starting your fast food franchise won't be easy, but you're guaranteed to learn a great deal along the way!
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