In a time when credit to open new businesses has been difficult, if not impossible to obtain, Sonia Sherwood of the Philadelphia Business Journal, discussed in this week’s issue how franchisors are making their systems more affordable to potential franchisees “by reducing franchise fees, offering incentives, providing in-house financing or scrutinizing their business model for savings that can be shared throughout the system.” (http://philadelphia.bizjournals.com/philadelphia/stories/2010/08/23/focus1.html)
Ms. Sherwood describes the various techniques that franchisors are using to combat the difficulty of new franchisees in obtaining funding for the business. In addition to lower actual costs, one franchisor, The Maid Brigade, a cleaning franchise based out of Atlanta, actually held a contest for veterans, with the winner winning the full cost of the franchise, $45,000.
Many franchisors are now providing financing directly to the new franchisees as an incentive. Franchisors that formerly were not willing to provide financing for the new franchisees are now viewing that option as a marketing incentive to draw new franchisees into their system.
Some franchisors have taken a different approach. Instead of lowering costs, they are tightening the qualifications to enter their system. Their approach is based on the philosophy that lowering the costs and offering financing and other incentives lowers the value of their brand and hurts the other existing franchisees in their system.
Regardless of the approach, this seems to be an excellent time for individuals looking for an established, proven business model to consider investing in a franchise.