Financing for Franchise or Dealerships

Aug 06, 2020

As per a report from India Brand Equity Foundation, India is home to a franchise market that stands second-largest on the global scale. With around 4600 franchisers and 1.5 lakh franchisees operating in 2018, the sector was slated to have a healthy growth rate across the next five years.

A franchise or dealership is a type of business structure where an organisation (franchiser) licenses some rights and authority for business sales and growth to another vendor (franchisee). It is a common strategy, considered as a smart approach for business expansion.

Now, as mentioned before, a franchise business model in India holds significant potential for growth, especially considering dealerships of foreign business giants. Additionally, with the revision of foreign direct investment clauses, a growth in consumerism, and reliable backing of franchise finance, it can make for one of the most lucrative businesses for you to undertake in the near future.

Following is an elaboration on the cost of owning some of the more popular franchise businesses in India, alongside the means to finance the same.

Owning a Franchise and Cost Involved

The cost of owning franchises and dealerships depends on the footprint of the business, whether it is a national or a global company, and the regulations imposed related to their business. It is essential for you to have an estimate of the overall expenditure so that you can apply for an outlet or a showroom financing accordingly.

Let’s take a look at the overall cost of licensing a franchisee across different sectors.

  • For a footwear, sports and apparel franchise – 

There are both Indian and international companies offering dealerships under this sector. The approximate cost of owning a franchise of any of these reputable brands can range between –

  • Bata – Approximately Rs.40 Lakh for an area of 1,000 to 1,500 sq. ft.
  • Adidas – Approximately Rs. 50 Lakh for up to 5,000 sq. ft. built-up.
  • Khadims – Approximately Rs. 30 Lakh for a 500 to 700 sq. ft. area.
  • Reebok – Approximately Rs. 50 Lakh for a 2,000 sq. ft. area.
  • For a food franchise – 

The food industry has some of the largest franchise owners in the country. However, owning any of these involves higher investments, as foods and beverages require a lot of equipment for preparation and storage. In this regard, availing substantial dealership financing may thus act as the essential source of securing high-value funds for these industries.

  • McDonald’s – Rs. 6.6 Crore to Rs. 14 Crore, with available liquid capital of approximately Rs. 5 Crore.
  • Papa John’s – Rs. 1 Crore to Rs. 2 Crore.
  • Phuchkaman – Rs. 5 Lakh to Rs. 10 Lakh.
  • For a car dealership – 

There are several factors that determine the cost of owning a car dealership. Some of them include the car brand, the number of dealerships already in the city, its location in the city, etc. Following is an estimated amount that you have to invest to avail any of the following dealerships in India –

  • BMW, Mercedes, Audi – Rs. 20 Crore to Rs. 25 Crore
  • Volkswagen, Ford, Hyundai, Honda – Rs. 15 Crore to Rs. 17 Crore
  • Maruti, Tata, Mahindra, Nissan – Rs. 8 Crore to Rs. 10 Crore

These are some of the more popular options, alongside their costs when it comes to starting a franchise business in India.

Alongside financing the purchase of one of these dealerships, you will have to consider availing funds for working capital, wages for employees, and utility cost, among others before setting up the business. Ensure you add all these to calculate the total amount required when seeking franchise finance.

Franchise Business and Its Financing

Surprisingly, a sizable percentage of India’s franchise owners acknowledge that it is their first business venture. A younger populace is more receptive to foreign business methods, making these endeavours especially rewarding.

Moreover, thanks to the availability of franchise finance, acquiring and maintaining a franchise has become easier than ever. You have access to various types of advances, including gold loans that extend substantial funding against the pledged gold.

These loans offer borrowers several advantages, like, ease of accessibility, secure transactions, and a flexible repayment period that allows you to pay off the debt without witnessing any financial strain. It thus helps collect the necessary financial backing without diluting the equity of your assets.

Your Ideal Franchise Financing Solution

There are several reasons that make a gold loan from Rupeek Fintech Pvt. Ltd, one of the best options when it comes to financing a franchise business. Rupeek offers several unique features, backed by a set of transparent policies and customer-first approaches that make it an ideal lender for your business endeavour.

It doesn’t end here, though!

Here are some of the benefits of availing a gold loan for your franchise or dealership business.

  • Instant disbursal –

Gold loan offers quick, hassle-free, and discreet application as well as disbursal process. You don’t need to visit any branch to complete the documentation requirements.

Once you apply for the loan through the company’s app or website, you will be able to schedule a loan manager’s visit to your home. The loan manager will come and complete the KYC registration and gold valuation, and if everything is in order, the loan will be approved instantly. The representative will leave your house with the pledged gold only when the loan amount is transferred to your bank account. The complete process only takes 30 minutes to complete.

  • High loan to value (LTV) –

The amount disbursed under a gold loan depends on the loan to value ratio offered by the lender, as well as the purity and weight of the pledged jewellery. Rupeek offers the highest LTV, allowing you to avail a substantial amount against the gold pledged.

LTV or loan to value ratio decides the maximum loan percentage that a lender can provide against the value of the pledged gold. A high LTV thus transcends to a sizable loan amount based on the gold available with you.

  • Safe and secure –

Gold loans as a form of franchise finance offer a secured borrowing facility. When you pledge your gold to Rupeek, your jewellery is taken in a GPS-trackable bag and stored at the nearest partner bank’s safety vault. To prevent further risk of financial loss due to accident or theft, the pledged jewellery is backed by an insurance policy.

As for franchise and dealership business, it is only likely to increase over the years, touching new milestones and providing a robust source of revenue for the Indian economy. With the help of franchise finance in the form of gold loan, you can tap into the growing market and become a successful business owner with ease.