Most franchise candidates are not accustomed to the financing terminology that most franchisors will typically discuss in an introductory call. I will identify the most common terms for your review.
Liquid Capital: This is usually the amount of cash that is required to purchase the franchise and pay for other items without using a credit card.* This amount typically includes the items listed below and excludes: home equity, stock and mutual funds and credit cards.
Cash in a savings account/or checking account
Home equity line of credit
Money Market Fund
Total Investment: The total investment will include all the information contained in Item 7 of the Franchise Disclosure Document. You should allocate enough funds to pay for the following:
Rent / Tenant Improvements
Start-up Supplies and Inventory
Advertising, Signage and Graphics
Grand Opening Marketing
Business Permits, Licenses and Fees
Net Worth: The franchisor will usually request a Net Worth Statement before, or at Discovery Day, verifying a snapshot of your financial situation. Net worth is calculated by determining your assets and subtracting your liabilities, to determine what you are worth financially.
All your assets may include, but not be limited to the following:
Life Insurance Policies
Art/Other Personal Items of Value
All Your liabilities may include, but not be limited to the following:
Child Support Payments
Knowing your financial picture before you head down the path of looking for a franchise will save you a lot of time. You can enlist the assistance of one of our franchise consultants to available to assist you with your search.
*Most franchisors do not accept the use of a credit card to pay for the franchise fee.