February 26, 2021

How to Start a Franchise with No Money: 3 Need-to-Know Tips

3 min read

If you’re looking for a fresh start, opening your own franchise can be a great option. After all, unlike starting a business wholly from scratch, a franchise already has name-recognition, a built-in brand, and broad appeal. From restaurants to shipping centers, there are plenty of industries to explore if you’re interested in opening your own franchise. However, some people may choose not to consider this path, because of the amount of money in their bank account. Here are three tips to start a franchise if you don’t have any money.
Find funding from several sources
Rather than looking for funding from one, core source, it may be worth exploring several different funding options to see if you can combine funding rather than put all of your eggs in one basket. This may mean asking friends or family members for small personal loans or applying for a small business loan yourself. Other things you could do to get some extra money include looking into a home equity line of credit (HELOC) or pulling some money from your 401k or retirement fund. One way to use your 401k savings is to learn more about the process of rolling over your existing account into a business startup.
It’s also worth talking about your financial situation with the franchise you’re interested in working with, because you may be able to lease some of their equipment rather than purchase everything outright. Some franchises also offer incentivized programs for minority groups that help you receive a reduced cost on your franchise fee. Looking into any or all of these financing options can be a major boon for your business, since many times funders look for other funders to help decide whether or not to give you money for a project.
Consider a partnership
Another way you may be able to start a franchise with little to no money is to look for a business partner to go in on the project with you. This might be a friend or family member, or it could be someone you’ve met in your schooling. It’s never recommended to go into a business partnership with someone you don’t know very well, as business relationships can often become fraught. Sharing responsibilities with another individual also means sharing profits, and so it is crucial to have a positive relationship with your business partner. How exactly you draw up a partner agreement will vary from situation to situation (and from partner to partner), so it’s a good idea to retain a franchise or business lawyer to help guide you through the process.
Choose an inexpensive franchise with high profit margins
When seeking out franchise opportunities, be sure to consider a franchise that won’t break the bank or is impossible to get enough funding for. Typical franchise fees cost anywhere between $20,000 to $60,000, but that fee doesn’t always include necessary training or equipment to run the business itself. Make sure you carefully read over the franchise agreement and fully understand what sorts of costs are associated with launching your franchise. From there, you can make an informed decision and choose a franchise that is well-priced overall and not just on its face. This can be a major factor in how your profit margins shape up, since if you have monthly loan payments and credit card bills, you will be eating into the money you make just to keep your business operating. Having a lower debt-to-income ratio from the onset can mean your franchise is more sustainable in the long run.
If you want to become a franchisee, you may think poor financials will keep you out of the game. However, there are actually plenty of ways to pursue your dreams and achieve your goals, as long as you follow the tips above. By finding external funding sources, considering partnerships, and making a prudent financial choice when it comes to picking your franchise, it will be possible to own your own franchise.

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