Do you already own a piece of the pie? If you are the owner of a franchise location to your favorite restaurant or store, you may be seeing success you didn’t expect. Perhaps that success has you wanting to open a second location of your franchise. If you are interested in franchise financing for a new location, it is important to know what your options are and how you can go about funding your dream.
Know if You’re Ready
Before you begin trying to finance your second location, it is important to know if you are truly ready for it. The benefits include new audiences, increases profits, and even a bit of prestige, but if your finances aren’t truly ready for the responsibility, you could find yourself in financial dire straits. Before you start the financing application process, seek out the perfect location that will pull in customers and ensure your current location will be able to function even when you aren’t there 100% of the time.
Consider Your Financing Options
When opening a second franchise location, you’ll have several options for franchise financing. Compare the costs, including interest rates and potential hidden fees, of the different types of financing before you decide which one will best meet your needs. Keep in mind that an SBA loan may be the best option for you. SBA backing is a good choice if you aren’t quite meeting the standards set for traditional bank loans and may allow you to borrow up to $2 million (although most fall in the $250,000 to $500,000 rage). You’ll need good credit and good cash flow, but neither will need to be as stellar as they would need to be for a traditional loan.
Know the Costs
When you consider opening a new location, it can be so exciting that you forget all the expenses behind it. A second location is more than just purchasing a new building. You’ll also need to purchase a second set of equipment, consider new advertising methods, and even remember that you will need to pay an entire second staff. Don’t forget that you’ll also need new business licenses and such.
Owning a franchise is an excellent business opportunity that helps you get in on an established business and decide if ownership is truly for you. However, franchise financing can be too much to take on if you aren’t truly ready. Remember to do your research and have a strong financial plan in order before venturing to a second location.