Franchise Buying Guide

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Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

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White Hen Pantry, an Elmhurst, Illinois-based neighborhood convenience-store franchise system that features fresh produce, grocery items and a full-service deli counter, also finances the purchase of franchises, but they go even further. "We select the site. We do the demographics, and we provide the land, building and equipment," says the company's franchising manager Gail Bosch. "All they're buying is the inventory."

In addition, White Hen, which only franchises in Illinois, northwest Indiana, Massachusetts and New Hampshire, pays the monthly rent, handles accounting, covers loss prevention and pays store vendors. In exchange, franchisees pay a weekly fee plus 7 percent of sales in royalties.

"It costs an average of $65,000 to get your store up and running, and we like to see franchisees to put down $15,000 to $25,000," explains Bosch, adding that the rest is financed at prime plus 3 percent (at a minimum of 10 percent). In some instances, adds Bosch, a franchisee is able to qualify for a lower down payment.

Michael Murphy is one such franchisee-he purchased a franchise in Pepperell, Massachusetts, in March 1999 with a down payment of only $10,000. "I wanted to keep some money to make sure I had something to fall back on," says Murphy, whose 24-hour store employs 13 people.

Bosch points to Murphy as a typical franchisee who would qualify for a lower down payment-he had worked in the convenience-store industry for years and knew what it took to operate such a business.

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