For franchise owners who are just getting into the business or are working to expand their locations, equipment leasing represents a considerable portion of your overhead costs. Some franchises require all locations to lease from the same financing company while others allows owners to select an equipment company of their choosing. Knowing the advantages and disadvantages of working with a recommended financial officer will help you make the best decision for your new location.
Once you’re approved to open a franchise in a geographical area, the next step is to find and outfit a physical location. Most franchises fall into one of three categories: quick serve restaurants, business services and personal services. The type of business you are opening will dictate the costs and needs of opening and operating. If you are considering working with a third party equipment leasing company, be sure to check with your franchise to verify that use of an alternate financing organization is permitted in order to avoid future penalties.
For entrepreneurs who are opening their first business, a majority of their assets have often already been used in becoming a franchise owner. In these cases, working with the recommended financing company is sometimes the best move; because of their familiarity with the equipment needs of your business, the preferred financier can better understand the items being leased and knows your financial history from previous application steps. Working with the recommended provider generally means less paperwork on the part of the franchisee since there is a precedent for ordering materials. While reduced paperwork is definitely a perk, working with these providers may lead to higher rates and overselling of equipment, costing you more over time.
If you wish to pursue leasing with a third party organization there are other factors to consider in your decision. Unlike the streamlined application process of the recommended financing groups, a third party group will require significantly more of your financial information. Since they will not be as familiar with the needs of yours business you will also need to provide the serial numbers, models, hardware and costs of all the equipment you wish to lease. While more work upfront is required, partnering with an outside leasing group often offers lessees flexible lease terms and more competitive rates.
Whether you are opening your first franchise or expanding your empire, you should always take time to evaluate your equipment leasing agreements and consider your options. Perhaps you’ve worked with the recommended provider for several years and are dissatisfied with the terms and service you’ve received. Other franchisees may wish to have more control over the items they order and options for lease extensions. Knowing what each leasing company has to offer your business will help you choose the agreement that is right for you.