How to Start a Franchise With No Money (2024 Guide)

How to Start a Franchise With No Money

Getting into the restaurant business can be tough. If you’ve ever thought about opening a restaurant, you may have learned this – it’s thought that about 30% of restaurants fail within their first year.

Franchising can be a more stable and risk-averse way to get into the restaurant business, but it’s not cheap. Franchise restaurants let individual investors buy the rights to the name, business model, and branding of a restaurant, in exchange for a portion of the store’s sales. Some of the most familiar restaurants in the world are franchises, like McDonald’s, Subway, and Dunkin’ Donuts.

While franchising is easier than building a restaurant brand from the ground up, it takes some research and business acumen to find the right franchise for you and to drive a franchise to success. It’s usually more affordable than starting a restaurant, too, but you’ll still need money.

In this article, you will learn how to start a franchise with no money.

What do you need to open a franchise with no money?

Opening a franchise with no money isn’t easy, and it’s a bit different from trying to open other kinds of restaurants. But one thing that’s consistent: you’ll need a great work ethic. Here’s what to do:

• Research your franchise: You might already have an idea of which franchise you want to pursue. Nonetheless, do some digging online to understand what franchising with different organizations entails. Every reputable franchise has information available online.

• Make a pitch: While your business plan for a franchise isn’t as crucial as it would be for a new restaurant, it’s still important to demonstrate to the organization that you’ve thought about the business and what it will take to make it successful. You won’t have much leeway in branding, of course, but you can still do market research and price costing to show how you intend to increase your profit margin. You want to showcase that you know what you’re doing.

• Find franchise capital: We’ll get into this later, but you need to find money somewhere.

• Licenses and permits: Licensing and permit rules vary from state to state, and even town to town when it comes to franchises. Not every town in America allows new fast food restaurants, for instance. Make sure you cover your bases to know what licenses and permits you’ll need in a preferred location.

• Staff including FOH, BOH, and managers: You won’t need to start hiring until you get franchise approval, and some organizations will actually help with this part, but it’s still a good idea to figure out exactly what kind of staff you’ll need on any given shift.

• Technology: Most franchises have adopted restaurant technology to streamline operations and help increase profits. Many even have proprietary tools. Most likely, you’ll get an assist from headquarters or have mandatory technology to implement. If you have some leeway, though, check out our rundown of the 9 most important types of restaurant technology you need to run your business more efficiently.

• A marketing or promotional plan: One of the areas in which franchisees can often take matters into their own hands is marketing – at least at a local level. Your franchise’s marketing plan is one way that you can drum up local interest and help your store stand out from competitors. Of course, you won’t be able to make broad marketing initiatives without approval from headquarters.

• An opening date/launch plan: Depending on the franchise, you may get some help from the head office on an opening date or launch plan. They may just tell you what to do. But if you do have some autonomy, coming up with a great launch plan will give your franchise a boost right out of the gate.

How much does it cost to open a franchise?

The cost to open a franchise varies greatly. For instance, Chick-fil-A has a franchise fee of just $10,000. KFC, on the other hand, has a $45,000 startup fee. Depending on the franchise, it will cost anywhere from $10,000 to $1.3 million to open a franchise, while you’ll continue to pay the franchise monthly fees that range from 2% to 50% of gross monthly sales. You may get some financial help to set up your location, you may get none. Every franchise works a little differently, so do a little research to find which franchise makes the most sense for your goals.

How to start a franchise with no money?

It can be very hard to know exactly how much money you’ll need to open a franchise, and if you don’t have much to begin with, starting a franchise may be tough. You’ll be limited in your options, but you still can open a franchise with no money.

Pick a helpful franchisor

To be frank, if you don’t have any money to spend, it will be next to impossible to start a McDonald’s or Dunkin’ franchise. That said, not all franchises are multibillion-dollar internationally-recognized businesses.

There are many more affordable franchises available to people who want to get into the franchising business, although food-related ones tend to be more expensive. Still, organizations like Nothing Bundt Cakes, Culver’s, and Freddy’s Frozen Custard and Steakburgers offer financing programs and professional guidance to help you get started, so long as you have some collateral and prove you’re a worthy candidate to invest in.

Apply for loans or explore capital opportunities

Believe it or not, many restaurant financing options are available to aspiring franchisors. Before pursuing a particular solution, however, make sure to spend some time with a financial advisor to make the right decision for your financial situation.

That said, aspiring franchisors may have access to traditional small business loans, small business grants, microlending, or alternative lending programs. 

Traditional loans may be a great way to cover your initial startup costs, although it will certainly prolong the amount of time it takes you to see a real profit. Small business grants are typically more available for small business owners, not franchisors, but you may find programs that support a particular locale. Microloans are often for less than $50,000 and can be a productive way to finance at least the initial franchising fees when you’re just getting started.

Finally, some alternative lending programs may support aspiring franchisors and help you work favorable terms to meet the challenges and nuances of owning a franchise.

Find an investor

It may be hard to find investors interested in restaurants – they can be high-risk, low-reward businesses. 

Still, that doesn’t mean you can’t find a deep-pocketed friend or relative who is willing to invest in you. Angel investors are people who invest money in people or ideas rather than in the potential for a huge windfall. Most often, they’re family members or friends who want to see you succeed, and reap a little bit of the profits when you make it. If you’re really dedicated to opening a franchise, you might be able to get an angel investor to support that dream.

Reach out to your local restaurant association

Finally, restaurant associations are usually more focused on small restaurants, but they absolutely know a thing or two about franchising. These organizations can help you find leads on franchising opportunities and connect you to the right people to discuss financing opportunities, find grants, and navigate local demand for franchises.

Some worthwhile resources to check out are:

• The National Restaurant Association, which has a wealth of experience working with and knowledge about national franchises.

• Your state restaurant association, which may have specific programs or perks to help new restaurant owners and aspiring franchisors.

• Local groups like rotary, which occasionally want to improve local quality of life by bringing specific franchises to town.

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Not all franchises have the same startup costs, demands, and expectations. Depending on what kind of franchise you want to open, you could spend anywhere from $10,000 to millions of dollars to get started. If you want to open a franchise with no money, don’t count on becoming a McDonald’s or KFC franchisor anytime soon. But you can work your way up to that point by starting small, finding the right franchising opportunities, and getting quality financial support. It all starts here.