The development and growth of franchise networks relies on the availability of accessible funding. When a business is ready to expand – whether organically or through a franchise model – it requires capital either to invest in its own additional sites, or to develop its franchise infrastructure such as writing its operations manual, preparing the necessary legal documents and franchisee recruitment programme.
Similarly, prospective franchisees require funding to purchase a franchise and make the necessary initial investments in it. Restricted access to traditional sources of funding in recent years has seen a growth in alternative finance sources for new franchise businesses and ventures. In particular, there has been growth in two areas; mini-bonds and crowdfunding.
Undoubtedly these alternative finance sources offer the franchise sector a real opportunity for growth. This article explains how these alternative financings work and considers the potential consequences of using them for franchisors and franchisees.