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Ask just about anyone what the biggest obstacle to franchise ownership is nowadays and you'll get the same answer: financing. Unfortunately, the same economic conditions that have more people than ever dreaming about entrepreneurship also have banks and other financial sources clamping down on the funds they need to make those dreams come true.
But the situation is far from hopeless, as the following list shows. While the list is not intended to endorse or recommend any particular company, it represents the top 249 franchisors, as ranked in Entrepreneur's 2010 Franchise 500® , that help their franchisees obtain the financing they need to get their businesses off the ground and keep them going strong. Consider it a good starting point.
As you will see, many franchisors--of all stripes and in every part of the country--are offering unprecedented levels of assistance. Some are getting into the venture capital game and making loans themselves. Marco's Franchising in Ohio and Connecticut-based Edible Arrangements , for example, are offering financing that often can cover a franchisee's initial startup costs, including construction and equipment. Others, such as CruiseOne in California, are discounting franchise fees or letting new franchisees pay their fee over time, while they get on their feet.
One thing is very clear, though: You don't need to step into a bank or liquidate your assets to get adequate financing. "Franchisors are offering incredible deals," confirms business-acquisition specialist Ted Leverette of Partner On-Call Network in New Jersey. "Some are waiving fees completely." In these tricky economic times, he advises, you should choose a franchisor that's willing and able to share the risk with you. At the very least, your franchisor should help you beef up your loan paperwork. For instance, some franchisors are purchasing bank credit reports on their company from FranData , which explain franchisor financials and present the concept in a positive light.
Certainly, these are encouraging signs for those who are thinking about taking the plunge. But as vital as financing can be, it's far from the only aspect to consider when entering the competitive franchise waters. Be sure to conduct your own thorough research before investing in any opportunity. That includes reading the FDD, consulting with an attorney and an accountant, talking to existing franchisees, and yes, considering your other financing options, including that old standby: family and friends.
Carol Tice contributed to this article