“Look before you leap,Ã¢Â€? is often given as advice. In todayÃ¢Â€Â™s world there is plenty of capital available for franchise systems. Venture capitalists and private-equity investors have grown comfortable with the predictable cash flow and exciting growth opportunities in franchising. As a franchise company exploring financing alternatives, it is important to understand all of the options before jumping into any arrangements.
By Ray Barton
There are several reasons a franchise company may look for capital. Maybe thereÃ¢Â€Â™s a need for growth capital. Perhaps itÃ¢Â€Â™s time to buy out partners or original investors. Creating liquidity for shareholders and management is also a common reason a franchise firm might pursue private equity.
A variety of capital sources exist, including:
Ã¢Â€Â¢ Senior Debt.
Ã¢Â€Â¢ Mezzanine Debt without Equity.
Ã¢Â€Â¢ Mezzanine Debt with Equity.
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