“Look before you leap,â€? is often given as advice. In today’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
IFA:
There are several reasons a franchise company may look for capital. Maybe there’s a need for growth capital. Perhaps it’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:
• Senior Debt.
• Mezzanine Debt without Equity.
• Mezzanine Debt with Equity.
• Equity.
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