When you get serious about investing in a franchise business, it’s customary for franchisors to request documentation regarding your financial position.
Many potential investors balk at the idea of having to share personal financial information before being accepted, but as you’ll see below, there are very good reasons why franchisors want your financials.
They Want to Ensure a Good Business Fit
As experienced franchisors, they have likely encountered many people who show interest in becoming a franchise owner. Unfortunately, many people are not serious about going into business for themselves, or are not knowledgeable enough about owning and running a franchise business.
In addition, the franchisors have a keen awareness of the necessary capital required to not only get the franchise business up and running, but how to weather the ups and downs that the economy brings.
Asking for your financial information is a way for the franchisors to ensure a good business fit as far as the seriousness of your interest goes. It’s also a good way for franchisors to gauge your financial position and ability to stay in business over the long term.
Your Accomplishments Reflect on Their Accomplishments
Franchisors are inherently vested in the achievement level of their franchise business owners. Every franchise owner under their umbrella is a direct reflection on the quality of the franchisor, including their support, brand quality and economic stability of the business model.
Failed franchise owners can and do have very real negative consequences for franchisors. So it’s a matter of pride for you to thrive as a franchise owner, but it’s also something that directly affects the future outcome of the franchise itself.
By sharing your financial information, franchise owners can better judge your financial health and available capital as they pertain to owning and running a business that carries the franchisor’s brand name and reputation.
You May Be a Potential Multi-Unit Partner
Savvy franchisors are always on the lookout for potential multi-unit partners. Multi-unit partners are those who own multiple franchise locations with the same franchisor. Multi-unit partners are extremely valuable to franchisors for several reasons.
One, they have already demonstrated proficiency with the business model, and two, they don’t need to go through the initial training program again to get started with their second and third unit, and so on.
Franchisors can get a good sense of your potential as a future multi-unit partner by reviewing your financials, which is always done with the utmost discretion. By sharing your financials, you could be able to maximize a potential that others can’t.
Your Investment is Also Their Investment
When you invest in a quality franchise, you receive valuable training and support in order to learn the business inside and out. This training, provided by the franchisor, is a way for them to help you make the most of your franchise opportunity.
This training and support is not a free service for the franchisor. It costs them money to provide you with the instruction, training and materials you need to learn about running the business. Franchisors invest thousands of dollars and many man hours in helping new owners learn the ropes.
Franchise owners who are not sufficiently capitalized for the long term can be disappointing, and potentially give up on the franchise entirely. That investment the franchisor made in the franchise owner is then wasted because they don’t see a return.
Documenting your financial health with the franchisor is one way for them to minimize the risk of losing you as a franchise owner. It protects their investment and yours.
Contact us today to learn more about starting your new franchise business.