Tag Archives: Buy a Franchise

8 Reasons To Consider A Lease For Your Franchise

A lease for your franchise?

When you’re buying a franchise you probably need money – most buyers do – and numerous lenders are lining up, especially at franchise expos, to be of service. One option that buyers often overlook is leasing, and it’s worth your time to check out the possibilities.

If you’re investing in a franchise that includes equipment, such as a POS system, or ovens and appliances for the kitchen, or if you need a truck, such as a van, you may be better off leasing than borrowing. Leasing equipment is the equivalent of “renting” the equipment, which means that you won’t take money from your working capital to buy the equipment.

With a lease, you get to use the equipment and pay monthly, and at the end of the lease you can acquire the equipment, or upgrade it and roll the package into another lease.

Here are eight reasons why you should consider a lease when you start a franchise:

·      Hold on to your working capital. Cash on hand is a huge advantage.

·      Claim a tax benefit. Section 179 of the U.S. Internal Revenue Service Code allows you to write off a percentage of a monthly lease payment.

·      FICO requirements are usually lower for leasing. There’s less risk with a lease so credit rating requirements may be lower.

·      There are no prepayment penalties. If it turns out you’ve got extra cash on hand, pay off the lease without a penalty.

·      You can choose the terms: 24 to 60 months. This helps you keep the payment amount in line with your cash flow.

·      If you’re expanding your business by opening a second unit, you may be able to use the first business to guarantee the lease and not have to sign a personal guarantee.

·      Securing a lease may be faster than securing a loan – especially if you’re leasing an equipment package or a vehicle that’s recommended by a franchisor. Leasing companies like franchise deals.

·      Closing costs are minimal: almost always less than $500.

There are few disadvantages to a lease. Of course, you still need to provide personal financial information and provide a variety of documents to the lender, but this is all the easier when you’re buying a franchise. Savvy franchisors develop relationships with leasing companies to expedite franchise sales and development.

You’ll find more information about franchise financing in my Amazon best-seller: 12 Amazing Franchise Opportunities for 2015. Chapter 2 is titled Funding Your Franchise Acquisition.

 

 

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Prospective Franchisee: Do You Have This Skill?

How To Franchise Your Business | Best Franchise

Recently I wrote about What To Do Before Buying A Franchise and I suggested a couple of questions that you could ask yourself before deciding if franchising, as well as business ownership, made sense for you.

I pointed out that it takes skills to operate a business or a franchise and I also said that franchisors will teach franchisees the skills needed to succeed in business — of course, that’s relative to the franchisor and the situation. Remember that not all franchisors are created equal; some do a better job than others when it comes to training and other operational issues.

The Must-Have Skill

But then I said there’s one skill that can’t be taught. In fact, this skill will make or break your success in franchising. Without this skill you do not have much chance of succeeding in franchising and, in fact, without this skill you should not invest in any franchise.

What’s the skill?

The ability to follow direction!

Sounds simple, doesn’t it? But not everyone possesses that skill.

Is THAT A Skill?

In fact, some people would argue that that’s not a skill. Call it what you want (it’s a skill!) if you don’t have it, you’re not cut out for franchising.

If you’re a regular reader of this blog, or you’ve read my books, or you’ve heard me speak about franchising at a public forum or over the airwaves, you know that I’ve described franchising as a series of systems.

It’s All About Systems

Systems lead to success in business and especially in franchising. There’s a system for marketing. A system for sales. A system for operations. If a franchisor doesn’t have these systems, do not invest in that franchise!

Even if the franchisor has the systems, no matter how good they are, if you don’t have the skill of following direction, do not invest in that franchise, or any franchise!

Franchisor May Say “No”

If you do lack the skill, hopefully a franchisor will discover it and not accept you as a franchisee — but, once again, not all franchisors are created equal. Some need the money that comes from selling franchises, so they may let you slip by and hope for the best.

If you cannot follow direction (or you just don’t want to), how do you expect to succeed in a franchise? If you’re the type of person who wants to reinvent the wheel, or you need to ask Why? when you’re told to do something, franchising isn’t for you. Franchisors know that — now you do, too.

 

What To Do Before Buying A Franchise

skills

Where to begin? That’s the problem for so many people when they think about starting a business, or buying a franchise.

The crazy thing is that it almost doesn’t matter where you begin, as long as you do!

And I don’t mean “as long as you do” as a way of saying it’s a mistake not to start a business, or buy a franchise. I mean “as long as you do” as a way of saying it’s better to find out if business or franchise ownership is for you than to continue wondering about the possibilities until it’s too late.

BEGIN HERE

Should you or should you not start a business or buy a franchise? Why not begin there? It’s as good a place as any, and thinking it through won’t cost you any money!

People seem to assume that they can start a business or buy a franchise. It’s easy enough to do either, but that doesn’t mean you should. Even if you have the money, and even if you have a great education, it doesn’t mean you’re cut out for business ownership.

WHAT ARE THE QUALIFIERS?

Some of the wealthiest people have failed at owning a franchise; and some of the smartest people have done some of the dumbest things while owning a franchise. So money and education are not necessarily qualifiers.

What is?

Skills!

That’s another good place to begin. Do you have the skills to start a business or to operate a franchise? Let me tell you: Most people do not!

CAN’T TEACH THIS

Of course, (most) skills can be learned, and (some) franchisors teach franchisees the skills they need, but there’s one skill in particular that can’t be taught. I’ll tell you about that in a future article.

Is a Franchise an Investment or a Job?

banner-investment

In response to this article: Is a Subway Franchise a Good Investment?, a reader on Linkedin asked if buying a franchise is “truly an investment” or “is it simply buying a job?”

My initial reaction was to strike back – I get the job question all the time – and I was about to reply: “Tell me a job that allows you, upon your resignation or retirement, to sell the assets that you developed while you worked the job.”

But something told me that the commenter was not being sarcastic. I think the investment question is honest, and I’ve thought about it this last week.

Is a franchise an investment?

Officially an investment is “the action or process of investing money for profit or material result.” My Linkedin commenter would agree: “The term investment suggests your capital contribution is working for you.”

So let’s see. Is building new highways an “investment”? Or is that a way for politicians to make us feel better about our taxes? Is a college education an “investment”? Or is that how educators make us feel guilty if we don’t get one?

Is a franchise a job?

I think most people would say yes, we “invest” in roads and education. But wait. My Linkedin commenter said “If someone buys the franchise, then works 16 hours a day keeping the doors open and paying the bills, is it truly an investment? Or is it simply buying a job?”

In other words, so long as you use your money, and not your time, it’s an investment. But when you contribute sweat equity then it’s . . . a job?

Technically, yes. But does it matter? Would we all feel better if we said that a college education is not an “investment” because it requires sweat equity (i.e. studying, analyzing, writing, etc.)?

Would it make a difference if we said that a franchise is not an “investment” because it requires sweat equity? Even if you like it, it’s still a job, so don’t call it an investment! God forbid, don’t buy one because you’ll have to work in it, and even if you like it and sell it for a fortune — well, it’s just a job!

Can you invest sweat equity?

Or is sweat equity an asset that can be invested? Hmmm. Ultimately, you’ll have to decide.

Meanwhile, I know a guy who owned six muffler shop franchises. He sold them for several million dollars when he was in his 80s. He happily worked in one of the shops every day for about 40 years. His initial “investment” was less than $40,000 to get the first shop. If I told him that all he had all those years was a job, he’d just look at me and . . .  laugh!