Business Financing Mistakes to Avoid When Purchasing a Franchise

Investing in a franchise with the same solid onboarding and ongoing strategy as The Dog Stop® lets you open a business without having to start from scratch. The franchisor should provide you with all the tools and training you need to achieve success and to remain successful. 

One of the first things you can do as a franchisee is to avoid common financing mistakes that put your store at risk. 


Franchise Financing Pitfall #1: Not Exploring All of Your Options 

Always shop around for financing options. While many franchisors offer their own financing, this doesn’t necessarily mean they offer the best rates. Franchisor-funded financing also tends to come with restrictions, such as covering only start-up costs and nothing else. 

To successfully open your own franchise store, you’ll need to cover start-up and operational costs, which usually include: 

  • Real estate for store location 
  • Professional services from architects and designers 
  • Supplies and equipment 
  • Furniture and fixtures 
  • Employee hiring and training 
  • Advertising 
  • Working capital 
  • Insurance 

As you explore financing options to cover all of these expenses, write down the pros and cons of each type. You’ll discover some financing options provide flexibility in how you can use the funds, making it simple to choose a solution that best meets your franchising needs. 

Some of the most common ways that people fund a franchise purchase include: 

  • Personal loans 
  • Home equity loans 
  • SBA loans 
  • Borrow money from friends or family 
  • 401(k) rollover 
  • In-house financing 

Franchise Financing Pitfall #2: Financing a Fad 

Don’t invest in a franchise that represents a fad. Fads are great when they are in, but as soon as they lose mainstream interest, they fall by the wayside, as do any franchise companies that represent the fad. Fortunately, most established franchises have tried-and-true methods of operation, but you’ll still need to do research to ensure you’re investing in a company with a track record of success. 

The Dog Stop® opened its doors in 2009 and has since delivered first-class dog daycare, boarding, training, retail products, and grooming services in a safe environment. We don’t operate in a fad industry, which has allowed us to provide peace of mind to thousands of dog owners. The Dog Stop Difference and has helped us build a proven record of success that keeps customers coming back while attracting more and more new franchisees on a regular basis. 


Franchise Financing Pitfall #3: Not Securing Enough Financing  

To help you compare franchises, most franchisors will specify how much cash you’ll need on hand. However, the total cost of buying the franchise and getting it up and running typically far exceeds the franchisor’s estimate. 

Don’t let this unknown frustrate you. Instead, borrow more than you think you’ll need. Having more is always better than running into the headache of not having enough. For some franchisees, not having enough capital is the difference between losing their investment and keeping their business doors open. 


Franchise Financing Pitfall #4: Waiting Until the Last Minute 

Taking time to shop for funding options is key to your overall return on investment. You’re less likely to sign an unfavorable financing contract if you avoid waiting until the last minute to secure funding. 

Giving yourself plenty of time to shop for funding is also important for timing purposes. It can take months for financing paperwork to go through. If you’re not careful, you may find yourself missing out on profitable franchise opportunities. 

Additionally, having your funding in place helps ensure you pick the right franchise option. You’ll have less stress on your mind as you explore different franchises, giving you more confidence in the final choice you make. 


The Dog Stop®: Want to Open Your Own Store? 

Are you ready to open your own franchise store? We already have 24 store locations in 12 states, with 50 new stores opening soon. If you need more information, get in touch with us today. Send us your comment or question and receive a response within 48 hours.