PRESENTATION OUTLINE
Private Equity Franchise Financing: Why It’s a Smart Move
Most entrepreneurs are familiar with the popularity of venture capital funds and their role in funding startups and early-stage companies. But did you know that a component of venture capital funds — private equity financing — is also a great choice when it comes to franchise financing?
For franchise owners, this is a positive as it invites investors who are interested in investing in growth-oriented, revenue-generating companies that have proven business models. In other words, private equity is inherently the ideal form of franchise financing.
Topics of Discussion
- Buying Out Existing, Yet Floundering Investors
- Investing in Expansion Capital
- Working with a Private Equity Firm
- Before You Choose a PE Firm, First Talk to Your Franchisor
1. Maybe your best friend initially chipped in, or a neighbor who was initially excited about the idea invested but has since grown wary. There are plenty of reasons why old investors might become tired of, or bored with, an idea. Working with a private equity financing group is a great way to breathe new life into a venture.
2. Maybe you’re just beginning with your franchise operation, or maybe you’ve been working hard for more than a year and are in need of more significant expansion funds. After all, it’s not uncommon for even owners of highly prosperous businesses to find their funds for expansion being tapped out. Perhaps your business and personal assets have already been pledged as collateral on loans from traditional financial institutions, or you’ve already diverted extra funds to other causes. This is where private equity funds can assist in furthering your franchise financing to enable new and prospering business owners to continue with their developments by funding and investing in expansion goals like acquisitions, new equipment and expanding product line developments.
3. Once you’ve signed the papers and the franchise financing funds have been transferred, you’ll begin the largely hands-off working relationship with your PE firm. While terms vary, most PE firms won’t get too involved with the day-to-day running of your operation. Instead, they’ll likely request seats on your board so they may have a say in major business decisions, as well as putting limit controls. Some might insist on either appointing individuals or having a say in the hiring of positions on your management team. It’s important to understand all of these details before signing any franchise financing agreements to ensure you know what to expect with the PE group.
Disclaimer: This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of or want to locate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your state. Franchise offerings are made by Franchise Disclosure Document only.
