Anyone know investors for a new franchise?
March 08, 2024
by a searcher from Morehouse College in Washington, DC, USA
Hello Funders,
I was connecting to see if anyone might have resources or know of investors who may be interested with investing into a new franchise.
Thanks in advance for all advice and suggestions!
from Bowling Green State University in Surrey, BC, Canada
If it's me, I would look for a concept that has developed its own corporate store network before they have moved into franchising.
In my experience, small/early-stage franchisors have a difficult business model. It takes scale to generate a sustainable business based on the royalty streams from franchisees. I have seen a number of these smaller franchisors sort of try and cheat their way to a business model through the generation of up front franchise fees, but as a franchisee what are you really paying for? - if the franchise has no footprint, no brand, and no marketing reach, you are less likely to realize value in that franchise system relative to a more established concept.
Furthermore, their need to bring in the up front fees to basically fund their own solvency can create an incentive for the franchisor to sacrifice quality of franchisee (ie. anyone with a pulse and a credit score), and will lack support for the franchisees as soon as the cheque clears because they are off chasing the next one.
All that to say, be careful, do your diligence, and dive deep - the franchisor will be selling you just as hard as you are selling them.
Best of luck, and apologies for the rant
from University of Notre Dame in Charlotte, NC 28277, USA