Anyone have experience with Franchise Liquidity Requirements

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November 12, 2024

by a searcher from Yeshiva University in Los Angeles, CA, USA

Does anyone have any experience with franchise liquidity requirements? Is there any way to get around the requirement of $500k of liquidity? I would assume it works differently from a regular acquisition where you can add an investor with a strong balance sheet,

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Reply by a searcher
from The University of Michigan in New York, NY, USA
In my experience, it really depends on the franchisor, but there's no reason to fear that every system you connect with will view this as a hard requirement. They're simply trying to weed out unserious inquiries in many instances. If they say they want to see 500k, you're probably ok with $475k, but likely not with $300k. I've also seen cases where if you tell the franchisor you have a co-investor and send them this person's proof of funds, they will consider this capital, even if you don't have a signed agreement with said person to present to the franchisor. At the end of the day, if they think you're serious and you generally have cash, you're good. Naturally, there are some systems that will be more strict, but that's more likely in situations where the demand from prospective franchisees is high.
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Reply by an intermediary
from Vanderbilt University in Dallas, TX, USA
You should speak with the franchise salesperson at the franchisor. If you had an investor he/she would have to likely be on the franchise agreement, potentially the loan and lease, if applicable. Most investors don't want to do that. Liquidity doesn't have to mean cash in a checking account. It can be in stocks, etc. Also, you can probably build in some amount of working capital in a loan. Anyway, it's the franchise sales person's job to help so don't feel bad bugging them!
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