1. Personal Financial Overview
- Net Worth: Total assets minus liabilities. Ensure it meets franchisor minimum requirements.
- Liquid Assets: Cash, savings, or investments readily available to cover initial investment and working capital.
- Credit Score: Indicates financial reliability and ability to secure financing.
- Debt Obligations: Assess current debts to understand financial flexibility.
- Financial History: Check for bankruptcies or defaults that may signal risk.
2. Investment Readiness
- Ability to Pay Initial Franchise Fee (Paushal): Confirm availability of funds.
- Startup Costs Coverage: Equipment, leasehold improvements, inventory, and pre-opening expenses.
- Working Capital: Funds to cover first 3–6 months of operations until breakeven.
- Contingency Fund: Extra reserve for unexpected expenses or slower-than-expected revenue.
3. Revenue & Profitability Expectations
- Projected Sales Understanding: Does the candidate realistically understand the business revenue potential?
- Break-Even Analysis: Ensure franchisee can sustain operations until breakeven.
- Return on Investment (ROI) Expectations: Check that expectations align with historical performance of existing units.
4. Financing & Access to Capital
- Bank Financing Eligibility: Ability to secure loans or credit if needed.
- Investor or Partner Funding: Availability of additional capital from partners or investors.
- Franchisor Financing Programs: Understanding of any payment plans or financing offered by the franchisor.
5. Operational Financial Competence
- Budgeting Skills: Ability to manage expenses, payroll, inventory, and marketing spend.
- Accounting Knowledge: Can interpret P&L statements, balance sheets, and cash flow reports.
- Compliance: Understanding of tax obligations, royalty payments, and reporting requirements.
6. Risk Assessment & Management
- Emergency Fund: Adequate reserve for unforeseen operational challenges.
- Insurance Coverage: Liability, property, and business interruption insurance in place or planned.
- Risk Tolerance: Willingness to handle financial ups and downs typical of business ownership.
7. Scoring & Decision Framework
| Criteria | Weight | Minimum Threshold | Notes |
|---|---|---|---|
| Net Worth | 25% | $X minimum | Covers startup and contingency fund |
| Liquid Assets | 20% | $Y minimum | Ensure cash availability for initial months |
| Credit Score | 15% | 650+ | Risk indicator for financing capability |
| Debt-to-Income Ratio | 10% | <35% | Measures financial flexibility |
| Operational Financial Competence | 15% | Sufficient | Budgeting and accounting skills |
| Risk Tolerance & Planning | 15% | Adequate | Contingency planning and insurance |
Scoring: Candidates must meet or exceed minimum thresholds to proceed.
