“Look before you leap,â€? is often given as advice. In todayâ€™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 thereâ€™s a need for growth capital. Perhaps itâ€™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:
â€¢ Senior Debt.
â€¢ Mezzanine Debt without Equity.
â€¢ Mezzanine Debt with Equity.