Franchises give business owners a chance to work with a tested business model, trusted products or services, and a proven marketing plan. But they also come with costs—sometimes high ones. There’s usually an upfront franchise fee, often between $25,000 and $50,000. On top of that, franchisees usually pay for contractor and professional services, as well as signage and inventory. Like any business, they must also raise enough money to cover day-to-day operations when starting out.

This means franchisees must look for funding options to help cover these expenses. Because it can be hard to secure funding, it’s important to build a franchise that investors are interested in. Below are five tips to help you make your franchise more appealing to investors. You’ll also find information on where to look for investors and lenders.

Did You Know?
Some low-cost franchise options include quick-service restaurants like McDonald’s and Dunkin’. But regardless of the starting cost, all franchises need a strong investment to get started.

How to Build a Franchise That Attracts Investors

1. Make Sure You’re Covered Legally

Hiring a business lawyer is a smart move when starting any business. For franchise businesses, it’s even more important due to all the legal matters involved. That’s why working with a franchise attorney is a good idea.

Franchise attorneys help with:

• Choosing the right business structure (like an LLC or corporation)
  
• Giving advice on taxes and legal rights
  
• Going over the franchise agreement
  
• Reviewing franchise disclosure papers
  
• Dealing with legal risks and liability concerns
  

Liability issues can be a big concern and may turn away investors. Even if your business didn’t create a product, you could still face large legal bills from product liability cases. Franchisees with several locations could face even more risk, making the business less attractive to potential investors.

Having a good franchise attorney can help you lower risks and protect your business.

Tip:
Product liability insurance can help pay for legal costs, settlements, or damages if your business is taken to court over a product-related issue.

2. Build a Strong Business and Marketing Plan

Buying into a franchise doesn’t mean you can skip making a detailed business or marketing plan.

Franchise Business Plan:
Investors will want to see your business goals, how you plan to grow, and a financial plan. Just following the franchisor’s model is not enough—you need to show you understand the market and have a clear strategy for success.

Franchise Marketing Plan:
While many franchises offer branded marketing materials, you’ll still need to build your own local strategy. Investors want to see how you plan to get customers and keep them coming back. A strong marketing plan will show your path to steady profits.

Include strategies like:

• Email campaigns
  
• Social media posts
  
• Local marketing and promotions
  

Make sure your franchisor approves any marketing plan to avoid branding or trademark issues.

3. Keep Your Finances in Good Order

Investors often walk away from businesses that don’t have clear, organized financial records—even if the brand is well-known.

As Niclas Schlopsna, a startup consultant and CEO of spectup, explains: “Investors want real numbers, not just good ideas.” He shared how one client caught investor interest by showing lifetime customer value compared to the cost of gaining a customer.

Whether you own one or several franchise locations, your accounting must be accurate. Use trusted accounting software that follows the franchisor’s requirements and works well with other tools, like customer management systems. Your system should be able to create detailed financial reports like:

• Profit and loss (P&L) statements
  
• Cash flow statements
  

FYI:
Your relationship with your business bank matters, too. Choose a bank that understands your franchise’s needs and supports your plans to raise money from investors.

4. Use Franchisor Training and Support to Boost Revenue

Franchisors usually want their franchisees to succeed and often provide training, resources, and tools to help.

Make the most of this support. If a franchisor doesn’t offer strong help, it might be a warning sign. Good training can teach you what products are most popular and profitable, helping you grow revenue more quickly—and showing investors you know how to run your business well.

You should also take extra steps to improve your knowledge and skills. Read industry news, talk with other franchisees, and look for professional development programs to learn more.

5. Stay Alert to Market Changes

Just because your franchise starts strong doesn’t mean you can relax. The market is always changing—consumer habits, new technology, competitors, and the economy can all impact your success.

Track your key business metrics (KPIs) and stay updated on trends. This helps you spot issues or new opportunities and take action. For example, if customer demand shifts, you could talk to your franchisor about launching a new product.

Being flexible and ready to act shows that you’re serious about running a successful business. Investors are drawn to franchise owners who are aware, responsive, and committed to growth.

Comparing Investors and Bank Loans for Franchises

In general, investors are more interested in new startups, while banks prefer lending to businesses with a stable history. Here’s what each group tends to look for:

What Investors Want in a Franchise

Investors often review the franchise’s:

• Pitch: Share a big-picture overview of your franchise. Explain your market, research, and how your product or service solves a problem. Include local market details, not just information from the franchisor. Show a clear plan for making your business successful.
  
• Return on Investment (ROI): Investors want to know how quickly your franchise can become profitable and grow. Many franchises are limited by territory, but you can expand by buying rights to nearby areas.
  
• Equity Offer: Instead of interest, investors expect a share in your business. Think carefully about how much ownership you’re willing to give up. Be clear and realistic. If your offer is vague or too high, it might scare investors away.
  

What Banks Look For Before Lending to a Franchise

Banks usually check:

• Cash Flow: They want to see that your business has steady income. They’ll look at your P&L statements, credit history, and financial reports. They might also review the franchisor’s financial standing.
  
• Collateral: Lenders want a backup plan in case you can’t repay the loan. If you own property, vehicles, or equipment, they might ask to use those as collateral.
  
• Experience: Banks also look at your background to decide whether you’re likely to succeed. Even though franchises are less risky than new startups, lenders still want to see your plan and understand how well you know the market.
  

Tip:
Create a short business bio for investors that outlines your background and your team’s experience. Be sure to mention any training or support you’ve received from the franchisor.

Where to Find Investors for Your Franchise

Finding investors is not the hard part. The key is making your franchise business a good choice for them. Here are a few ways to find investors:

• Online financing companies: Some lenders focus on franchise funding, like BoeFly, Swoop Funding, and ApplePie Capital.
  
• Franchisors: Some franchisors offer their own financing or work with consultants to help new franchisees with costs.
  
• Social media: Platforms like LinkedIn are great for networking and reaching out to investors. You can also use Facebook or X (formerly Twitter) to join discussions and build relationships.
  
• Blogging: Sharing your business journey, goals, and updates through a blog can attract long-term interest from potential investors. You can also learn what investors want by reading their blogs.