How people actually pay for a franchise

Cash and savings

The simplest route, and the one that keeps your monthly obligations lowest. The trade-off is concentration: putting most of your liquid savings into one business leaves less of a cushion for a slow first year. Most advisors, including us, suggest keeping a separate reserve for personal expenses.

401(k) or IRA rollover (ROBS)

A Rollover as Business Start-up lets you invest eligible retirement funds in your own business without taking a taxable distribution or early-withdrawal penalty. It requires setting up a C corporation and a qualified retirement plan, and it has ongoing compliance obligations. Work with a reputable ROBS provider and your own tax adviser.

SBA loans

SBA-backed loans, most often the 7(a) program, are a common way to finance a franchise. Lenders expect an equity injection from you, typically somewhere in the 10 to 30 percent range depending on the lender and the deal, along with solid credit and relevant experience. Many franchise brands are pre-reviewed for SBA eligibility, which can simplify the process.

Home equity

A home equity loan or line of credit can offer a lower rate than unsecured borrowing, but it puts your home at risk if the business struggles. Consider it carefully and alongside your household’s overall risk tolerance.

Partners and investors

Bringing in a partner can reduce your capital requirement and add skills. It also adds complexity. Put roles, decision rights and exit terms in writing before you sign anything with a franchisor.

Franchisor incentives

Some franchisors offer reduced franchise fees for veterans, multi-unit commitments or conversions of existing businesses. These can help at the margins, but should never be the reason you choose a brand.