What Franchise Finance Covers
Franchise Fee
The initial licence fee paid to the franchisor can range from £5,000 for a home-based franchise to £500,000 for a large-format food or retail concept. Most franchise lenders will fund 50-70% of the franchise fee, with the franchisee contributing the balance from personal funds.
Fit-Out and Premises Costs
Retail, restaurant, and service franchises typically require a branded fit-out of leased premises. Finance is available for leasehold improvements, shopfitting, signage, and initial equipment either as part of the franchise finance package or as separate asset finance.
Equipment and Technology
EPOS systems, kitchen equipment, service vehicles, tools, and technology specified by the franchisor can be financed through hire purchase or finance lease, reducing the upfront capital requirement.
Initial Stock
For franchises requiring a product inventory at launch, stock finance or a working capital element within the franchise loan covers the initial purchase ahead of revenue generation.
Working Capital
The period between opening and reaching sustainable profitability - typically 6-18 months for a new franchise territory - requires a working capital buffer. Specialist franchise lenders build this into the overall facility.
How Lenders Assess Franchise Applications
Franchise lenders look at both the franchisor and the franchisee. For the franchisor: how many franchises are operating successfully; what is the average unit profitability; is the brand registered with the British Franchise Association (BFA); what is the franchisor's failure rate. For the franchisee: relevant industry experience; personal credit profile; personal contribution (skin in the game); and the selected territory's market potential.
Multi-Site Franchise Finance
Established franchisees seeking to acquire a second or third territory can access larger facilities structured against the combined trading performance of the existing portfolio and the projected revenue from the new territory.