Franchising is a competitive market space. When owners want to expand, they need to have interested buyers who are capable of handling the responsibilities that come with buying into the business. The challenge is that good franchisees have a lot of options on the market that they can choose from.
To help bring in the best talent to a business and drive the desire to own a location, franchisers need to make their deals more competitive. There are many incentives that franchisers can offer to help finalize a new sale for their business.
"Some companies offer new buyers a way out."
1. Waive start up fees for the first few months
According to Franchise Update, some franchisers are courting new owners by waiving some of their fees for a pre-determined startup period. Papa Johns, for example, has offered past deals such as waiving the $25,000 startup fee, or allowing buyers to skip paying royalty fees for the first year. Incentives like these can help close a sale for a new branch opening. While many of the legal fees that go into buying a franchise portion need to stay, deals that take away advertising prices or other owner-set costs can make a business more appealing than its competitors.
2. Give buyers time to make money before they pay initial costs
Another way that franchisers can win over new partners is to allow them to get the businesses up and running before demanding all of the business costs. The Wall Street Journal reports that Harriet Mills, CEO of Raleigh, N.C.-based Wine and Design, allows new buyers to postpone their $25,000 startup fee for the first year, essentially offering an interest-free loan to help them get the business up and running.
"It has allowed a lot of our franchisees to put the money into building their companies," she told the source.
Many potential buyers may be interested in buying into a franchise but are wary of sinking in all of those initial costs. By giving them time to earn money with their new branches first, they may feel confident enough to sign up.
3. Provide buyers with a way out
Another thing that may turn buyers off from purchasing a franchise is the commitment. It can be a big risk for a person to spend her money on a new location of a business, which is why some companies offer new buyers a way out. Using a six-month or year-long window, franchisers who can afford it will allow new buyers to sell back their location if it doesn't feel like a good fit.
To protect themselves, these franchisers will offer a pre-determined amount to be used to buy back a new location. This way, buyers won't spend excessive amounts of money with the expectation that they can recoup all of it whenever they want. There's still an incentive for them to try and make the new business work, but they aren't so tied into it that they are afraid to even try in the first place. The franchiser can then turn around and sell an established business to a new buyer, who may look forward to having less startup work to complete.
Equipment and franchise industry piece brought to you by Marlin Equipment Finance, a nationwide provider of commercial lending solutions for small and mid-size businesses. Marlin's equipment financing and loan products are offered directly to businesses, and through third party vendor programs, which include manufacturers, distributors, independent dealers and brokers in the security, food services, healthcare, information technology, office technology and telecommunications sectors.