gofer articles

Many small business owners balk at the daunting statistics facing new small businesses: 33% will fail within their first couple of years, and 56% will not make it past four. Many go under the common notion of thirds – that one third of small businesses will turn a profit, one third will break even, and the last third will never break outside of a negative earnings scenario. Still looking to run their very own business but fearing these odds, many will then consider opening a franchise, which usually still calls for franchise loans.

Franchising is, in essence, a similar alternative to opening a series of chain stores. Whereas an individual company looking to expand will open a chain of stores using their own funding, employees, marketing, etc, a franchisor expands their brand by giving all of these responsibilities to a prospective franchisee in exchange for permitting them full use of their trademarked name, marketing and other business aspects unique to that particular brand. If a franchise fail, this frees the franchisor from personal loss given the absence of a direct stake in its success.

However, it is a profitable proposition for an small business owner since the already established success, and people’s preexisting familiarity with the brand and marketing help guarantee a certain customer base, making for a a lot more sure bet as compared to starting a completely new independent business. In a nutshell, a franchise is a brand name establishment that is independently owned and managed by a third party under permission and guidance from that franchise’s parent corporation.

However, because the entrepreneur is basically buying permission to use a brand name, as well as an established business model from a large franchisor, they still must put personal financial stake in the operation which can be acquired via franchise loans.

Franchise loans resemble just about any other type of business loans in that they’re granted by a bank for use in establishing a business with the business owner’s intention of repaying the borrowed funds. How big various franchise loans will naturally vary with regards to the brand of the franchise an entrepreneur is seeking to open, some of which are vastly cheaper than others.

Subway restaurants, for example, are perhaps the most favored franchise in the United States, with a startup cost ranging between $84,300 and $258,300. On the other hand, a 7-11 can be opened for as low as $40,500, while a Hamton Inn can cost as much as $13,148,800 to open. Naturally all of these startup costs rely on many factors ranging from geographical location, to size and scale of the establishment, to the economic climate of the area where their opened. No matter what, even cheaper franchises cost you a significant amount, making franchise loans a lot more than necessary for the typical entrepreneur.