AIB recognises the importance and potential of the franchising
sector to the Irish economy and is committed to backing its growth.
Whether starting-up your first business or expanding an existing
franchise network AIB has a range of financial products and
services to provide the required support. We are available to our
business customers through our branch, phone and online channels
and look forward to talking to you.
Raising finance is one of the most critical considerations for
any entrepreneur looking to start their own business. Before
starting the process it is vitally important that a promoter has a
detailed breakdown of what funding is and will be required to get
the business off the ground and operating. When buying a franchise
this can include a combination of the upfront franchise fee,
initial capital expenditure on equipment and the working capital
requirement on an ongoing basis.
The next issue will be identifying the sources of funding. The
type of funding required will depend on the business model of your
franchise and in the majority of cases the sources of funding will
be varied. From a banks perspective (and franchisor too) it is
strongly desired that the promoter provides their own funding to
the venture demonstrating their commitment to the business and a
willingness to have some “skin in the game”. Ideally this money
will come from savings or an equity partner rather than personal
borrowing as this will put undue pressure on your business to
service both company and personal debt.
Often franchising a start-up can be challenging due to the
lack of a demonstrable track record. However working with an
established franchise system that has a proven concept and a
history of achieving results with other franchisees has a great
benefit. Not only does it give an entrepreneur confidence, it
enables any potential lender to get greater insight into what
should be expected from a new outlet in terms of the key
performance indicators, financial and operational. Combine this
with the support that a new franchisee can expect from an
established franchisor and their system and this creates a lower
risk proposition than as a standalone start-up thereby improving
the likelihood of accessing finance.
The level of bank finance that can be provided to a new
franchisee will vary and depend on a number of factors, the
strength and track record of the franchise system you are joining
being one of the most important. The quality of your business plan
is also vital. A prospective franchisee should work with the
franchisor to produce a detailed financial plan that is supported
by all the relevant information on how you will achieve your goals.
It also needs to contain contingency plans in the event that things
don’t go exactly as designed and allow for reinvestment. A detailed
profile on the promoters should also be included to illustrate
their applicable experiences and how you have the competence and
capability to be successful with the franchise you have chosen.
If you are thinking about purchasing a franchise and will
require bank finance it is important that you talk to your bank as
early as possible and outline your plans. Your local relationship
manager will be in a position to advise you more specifically on
what type of finance is most suitable for your business needs.
to find out more.