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  1. Collapse Details
    Purchasing an Existing Franchise
    Hi everyone, new guys here and really needing/wanting some guidance from some professionals out there regarding financing of a franchise.

    As first time business buyers, we are looking to purchase an existing co-branded franchise (Quick Serve Restaurant) with a 10 year operating history in a major regional mall. The current owner is asking 400k. The gross is appx 700k and the net profit is averaging over 160k based upon three years of tax returns & P&L's we have seen to date. We have 60k (15%) in cash to put down on the business and are seeking the finance the balance of 85%.

    Some of our resources are telling us that this will be very difficult to do with this little personal commitment and have suggested asking the current owner to carry a 2nd position note for 10% or 15%, which may make it more attractive to a lender...however, this is not our first choice of options.

    Is it even possible to pull this off with 15% down? Is there a "magic number" generally considered a minimum amount of personal commitment money for a first time business acquisition?? We MAY have (unsure at this point) a family member willing to lend us the money to bring it up to 20% down. Are we better trying to go for the owner to carry a note instead? Does anyone have any thoughts on this and/or resources for financing franchises with minimal money down for a first-time acquisition?

    I know this is alot of questions to ask, but as we have made the offer and it has been accepted by the seller, we are under the gun to scrape the financing together ASAP and we are getting nervous...

    Any help or advice would be honestly appreciated.


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    Dont know a whole lot bout franchises other than I see em as payin out a ton of money ya dont need to. First question that ya need to answer is "are ya experienced in the resturant business?" If not, franchise or not, statistics and my experience shows its a bad proposition. If you guys are experienced with resturants, your better off opening your own. Ill never understand payin franchise fees just cause of a name. If ya got good food, good service, clean place and good quality, youll make your own name without having to pay a fortune. Another thing you need to be worried bout with franchises is that when ya buy one, your stuck with for a long time. They dont do short term. Meaning even if ya lose money at that particular site, your stuck with the franchise there, which means if ya decide ya cant afford it, ya just cant sell the property, ya gotta sell the franchise along with it. That usally doesnt turn out too preatty.


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    SBA Loan?
    #3
    Join Date
    Feb 2006
    Location
    Las Vegas, NV - Nashville, TN
    Posts
    16
    Have you considered looking into an SBA Guaranteed Loan. If you have reasonable credit, equities in R.E. and other assets, you may be able to leverage in with the smaller amount of cash. They recently dropped the express loan program (bummer).

    Are either of you a minority or will a wife be involved in the ownership? Could be a benefit if classified as a minority business. The SBA won't make the loan, but may guarantee it. You do need to have fairly good credit and financials. If this sounds interesting visit http://sba.gov





    Regards,
    Maverick


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