Franchise Angel Investors: Everything You Need To Know

Franchise angel investors are individuals or group of individuals that provide capital to aspiring business owners to fund their franchise businesses.3 min read

Franchise angel investors are individuals or group of individuals that provide capital (and in some cases, expert advice) to aspiring business owners to fund their franchise businesses.

Franchising: A Successful Business Model

Since the 1940s, franchising has served as a vehicle through which small businesses have grown into successful national chains. Franchises have a 90 percent success rate, making it the business model with the lowest failure rate. A study undertaken by the U.S. Chamber of Commerce showed 97 percent of franchises were still operating after the first five years and that 86 percent of them were still under the same ownership.

As such, franchising is a thriving strategy through which individuals and small businesses can grow and prosper, but only if the capital needed is made available.

Funding a Franchise Business

The cost of acquiring a franchise can be prohibitive. The more expensive the franchise, the greater its earning potential. Individuals must pay for the right to use the name of the franchisor and benefit from expert assistance.

Individuals who are looking to fund their franchise business typically use their savings, mortgage their homes, or borrow from friends and family. They may also seek out angel investors.

In the U.S., angel investors account for over $80 billion in seed capital investment. They invest $7 to $10 billion annually and typical transaction sizes range from $100,000 to $1 million. Angel investors usually invest in industries where they have expertise.