Five Entrepreneurs, Five Different Ways Of Raising Money

Five entrepreneurs. Five different ways of raising enough money to buy a franchise. Here’s what they learned.

- Daniel Bortz

The companies on our annual Franchise 500 list come with a huge range of price tags. You could open a Jazzercise exercise-class franchise for as little as $2,405, for example, or a Buffalo Wild Wings unit for between $1.99 million and $3.8 million. So once a potential franchisee finds the right fit for them, they have to answer a big question: How are they going to pay for it?

There are many options—from straightforward friends-and-family loans to complicated 401(k) investment techniques. Each comes with its own benefits and pitfalls, and, financial experts say, the best one for each person depends on their earning potential, current asset position, how much they have saved, their creditworthiness, and most importantly, their risk tolerance.

But that all sounds hypothetical, which is why we wanted to see how these financing plans play out in real life. On the following pages, we profile five successful multi-unit franchisees who each paid for their first franchise in a different way. They reveal the up-front costs, the size of their loans, and what they think of that decision today. Then we run it all by E. Hachemi Aliouche, a professor and director at the University of New Hampshire’s Rosenberg International Franchise Center, who breaks down the pros and cons for any potential franchisee.

FINANCE OPTION 1

Personal Savings

WHEN DOUG PORTER decided to launch a new career after retiring in 2015, the San Diego–based Navy veteran, now 62, set his sights on the hair-care industry. “I considered two important factors. One was that this industry was not likely going to be disrupted by the Amazons of the world in my lifetime, and the other was that statistics showed this industry is fairly recession-resistant,” Porter says. “People don’t stop getting their hair cut when the economy dips.”