Funding - How to become a Multi-Site Franchisee
Your first franchise is booming and you’re now looking to become a multi-site franchisee, but where do you find the capital to fund your second site? And how do you ensure you don’t miss opportunities to expand your franchise?
If you’re a successful franchisee looking to expand your brand by taking on another site, there are some preparations you must do before lenders will consider funding your future business. In terms of timing, it is important to have the first store running efficiently and profitably, according to Cashflow It Managing Director, James Scurr, as lenders will want evidence that you have a proven track record with your first store before taking on additional sites.
“Having an accountant prepare your financials to ensure they demonstrate a healthy profit will go a long way in securing funding for a second or third site”, says James. “This not only shows your ability to successfully run a business, but the profit derived from the existing store will help the lender assess the serviceability of the proposed lend on the second store”.
Often franchisees use all their available capital to fund their first store. This means they may miss out on opportunities to expand and become a multi-site franchisee. One way to ensure you can take advantage of opportunities when they become available is to have access to capital.
“At Cashflow It, we fund the fit-out and equipment costs for greenfield sites and we can also free up capital by funding the used equipment in the original store”, explains James. “We can also assist you by offering a sale and lease back of the original equipment to help free up important capital”.
Another viable option for franchisees is to have their franchise system accredited. “We have an accreditation program for franchise brands where franchisees are “pre-approved” for funding”, says James. “This approval is based on a per-store basis rather than per individual. So, a franchisee can have guaranteed access to funding multiple stores simply by completing an application form and providing a copy of their driver’s license”.
One of the benefits of using a specialised financial lender like Cashflow It is that many finance products offered are 100 percent tax deductible and are ‘off balance sheet’. “This is different from many other lender products where only the interest portion of the repayments can be considered a tax deduction”, explains James.
“The idea of multi-site ownership is that revenue and profit increase, which also means that the amount of tax paid also increases. But by funding your assets with Cashflow It, you can reduce the amount of tax paid”. The same goes for using funding ‘off balance sheet’. “By not displaying the finance on your balance sheet, franchisees will still have the ability to borrow from lenders”, says James.
