The Franchise Forum

Expert financial advice, content, and strategies for your franchise business

Should I consider partnering to grow my franchise footprint?

Taking on a franchise partner can be an excellent option for growing your franchise footprint; however, there are many considerations before getting involved in a franchise partnership or development group.

"Many people are single owners, either running the business themselves or with their spouse," says Jack Winfield, a franchise finance specialist at ApplePie Capital. "But when you have multiple locations, anywhere from four and up, you usually see partnerships built. It's either because different partners have different areas of expertise, or because they're stronger financially as a team."

Many franchise business owners look to expand after opening their initial locations, but going it alone can prove difficult, both in terms of finances and operations. Geography may also play a role in your decision to have a partner in your franchise business. If you wish to spread out and take advantage of franchise opportunities in locations far away from you, it's essential to have someone you can trust to oversee operations. Additionally, franchise partnerships typically translate to greater overall liquidity, making it easier to obtain capital when necessary.

Franchise partners come in all shapes and sizes. There are partnerships where both partners are on the ground, assisting with the operating of various franchise locations. Then there are partnerships where one person may be focused on operations while the other is more of a financial stakeholder, or "silent partner."

Avoid franchise partnership pitfalls

Keep in mind that sharing your franchise business with one or more partners opens the door to potential complications.

"It's really like a marriage," Jack says. "There are so many different things we take for granted when it comes to doing things a certain way. If you want to do things one way, and your partner wants to do them another way, that can cause friction."

Jack recommends potential franchise partners discuss specific situations that are likely to arise before making a final decision.

"It's good to have the foresight to walk through different scenarios together to see how each person thinks they should be handled," he says. "If you gain a partner and open a new location, that first six months is tough. What if at the end of six months things aren't coming together as quickly as you'd like? Where does the extra capital come from? Will one partner take out a loan on their home? Will the other partner expect them to do that? Will one cut and run while the other takes out more money to make it work?"

"Determine how devoted you are to the franchise before signing."

Consider this: Perhaps you take on a franchise partner who is willing to put up their home as collateral to secure a business loan. However, that person then decides he or she no longer wants to fulfill their end of the partnership. At this point, if you wish to continue on alone or with a new partner, you would need to make arrangements to have your partner's home released and pay off the loan. The stress of opening and operating a franchise business can become even more taxing if your former partner is rushing to dissolve the current arrangement and failing to follow through on his or her previously assigned role.

It's essential to determine how devoted you are to a franchise business before signing on the dotted line. You must fully understand what your overall objectives are and how committed you are to achieving them. The same should go for your partner.

Financial transparency is also paramount.

"I would want to make sure the partners are comfortable sharing their financial positions with each other," Jack says. "If one doesn't want the other to see their tax returns or holdings or debt, that can make it very difficult. Someone can embellish or outright lie, and cause a major disruption to your franchise business plans."

Imagine trying to take advantage of new franchise opportunities only to find your partner or partners failed to disclose past credit problems that prevent you from obtaining the specific loan product you need.

Seek a strategic franchise partnership

The foundation of a strong franchise partnership is built on mutual understanding and agreement. No matter what type of franchise partner you're considering, it's essential you both understand what the other is hoping to achieve and are on the same page about how to do so.

Selecting a partner with complementary traits to your own, as well as being transparent regarding personal finances, future goals and overall commitment to the business, is a recipe for a strong partnership.

Working with a franchise partner can help you ramp up business growth and expansion more quickly and easily. Just remember to choose a partner with the same care and attention you would when selecting franchise opportunities. Due diligence from the start prevents problems down the line.

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