The franchisor will have its own capital investment requirements that vary based on the restaurant and its particular location. For example, large nationwide chains might cost significantly more than a new or smaller chain. Prior to becoming approved by the franchisor, your potential client will need a certain amount of liquid assets and available capital that is theirs, not borrowed. However, some of the startup costs can be financed.
Financing an Existing QSR Franchise
Access to capital can be a concern for even the most established QSR franchise owners. Banks and credit unions typically require solid credit scores and extensive collateral for their franchise loan products. Both franchise working capital loans and franchise equipment financing offer relatively quick and easy ways to secure funding for a QSR franchise. Both of these are becoming very popular among franchisees for two reasons: they are easy to apply for and offer a high approval rate because a near-perfect credit score is not a requirement.
There are many independent lenders and micro-lenders that specialize in franchise working capital and franchise equipment financing. Some franchisors have established financing partnerships with lenders that offer custom-tailored financing solutions for their franchisees. Working with a franchisor-endorsed financing company is a huge benefit because they know your business and have the corporate “stamp of approval.”
Franchise working capital loans are short-term business loans that can be used for any operating expense. The franchisee can use their working capital loan to pay franchise royalty fees, rent, utilities and employee payroll. It can also be used to expand their existing QSR franchise. This type of loan is a great option for maintaining positive cash flow.
Franchise equipment financing is the preferred option of many QSR franchisees because it enables them to keep their establishments up-to-date with the very latest equipment, furniture and technology without having to make a large cash purchase. Similar to a franchise working capital loan, getting approval for a franchise equipment lease is easy because there are less stringent credit-score and collateral requirements. Some of the common types of QSR equipment that can be financed include broilers, ovens, refrigerators, freezers, fryers, beverage dispensers, point-of-sale (POS) systems, furniture and fixtures.
QSR Re-Imaging Financing
The furniture, fixtures and equipment (FF&E) – and overall appearance – of a QSR franchise are essential to its success. The objective of a QSR franchise owner is to increase sales and position their QSR as the preferred dining destination for their prospects and repeat customers. Serving delicious food in a timely manner is just one part of the equation. Franchisees also need to provide customers with a good brand experience each time they visit. A clean, well-appointed franchise that is equipped with the very latest FF&E can help achieve this objective. That is where the re-imaging/remodeling process comes in.
QSR franchisors launch re-imaging campaigns to make refreshments and/or upgrades to their stores and improve their appearance and customer experience. When the time comes for a franchisee to facilitate a re-imaging campaign, the franchisee will need to examine the various financing options that are available. Re-imaging costs, depending how extensive the projects(s) are, can be quite expensive, particularly if the is a multi-unit QSR franchise owner. Depending on the franchisee's individual re-imaging needs, they can opt for either a franchise business loan or franchise equipment financing program.
Summary
A QSR franchise owner’s basic philosophy should be to set aside profit first and make capital investments using available funds. In the event that the franchisee needs to make a sizeable equipment or technology purchase, or need an influx of capital for operational needs, they should take the time to examine all of the financing options that are available.