How to Plan Working Capital When Buying a Franchise

Securing funds for the initial franchise fee, fit-out and equipment may not be enough to finance the first few months of trading. Even once sales begin, payments may take time to arrive, while wages, rent and stock bills cannot wait. Before joining a franchise network in Türkiye, ask yourself: which payments will you need to cover, and from what sources, until the business generates its own cash? A working capital plan turns this question into an investment decision grounded in figures.

1. Separate your opening investment from working capital

Your opening investment covers the expenditure needed to get the business ready to trade. Working capital funds its day-to-day operations. Combining the two into a single “total investment” figure can obscure how much usable cash will remain on opening day.

Prepare your budget in three separate lists:

• Pre-opening payments: Initial franchise fee, refurbishment, equipment, consultancy and business set-up costs.
• Operating cash requirements: Stock replenishment, staff wages, rent, utilities, taxes and other regular payments.
• Unavailable or tied-up funds: Rental deposits, funds blocked by a bank, cash set aside as security and sales revenue not yet received.

Do not count the initial stock purchase twice by including it in both the opening expenditure list and the operating budget. However, if you need to place a new order before receiving payment for sales of your opening stock, show separately how you will fund that second payment.

Calculate your personal living costs separately from the business budget too. If you need to draw money regularly from the business during the first few months, include this explicitly in your cash flow plan. Assuming that the owner will work without pay can understate the true funding requirement.

2. Prepare a dated cash flow schedule, not just a profit forecast

Profitability and the ability to meet payments are not the same thing. A sale may be recorded today, while the proceeds of a card payment reach your account later. Meanwhile, your supplier may require payment upfront. Do not rely solely on monthly income and expenditure forecasts: monitor cash flow weekly, particularly around the opening period.

For each week, record the opening cash balance, expected receipts, payment dates and closing balance. Show card payment settlement times, online ordering platforms’ payment schedules and any credit terms offered to corporate customers on separate lines.

The basic calculation is:

Closing cash balance = opening available cash + cash receipts + confirmed funding inflows − cash outflows.

Do not treat an unapproved loan or an anticipated government incentive as confirmed funding. Loan principal repayments may not count as operating expenses for accounting purposes, but they still take cash out of the business. Work with your accountant to schedule tax payments and account for the cash flow effects of input and output VAT.

After allowing for your planned equity contribution and confirmed financing, the largest projected negative balance shows how much additional funding you need. Set a cash buffer on top of this amount according to the flexibility of your payment obligations and the uncertainties facing the business; no single percentage suits every franchise brand.

3. Ask the franchisor for documents explaining the cash cycle

The purpose of this review is not to assess sales promises, but to understand when the proceeds will become available once a sale is made. Ask the franchisor for a sample payment schedule, an initial stock list, ordering frequency and documents explaining payment collection processes.

Seek written answers to these questions:

• Which payments must be made in full before opening?
• When is the first stock replenishment due, and on what payment terms?
• During promotions, who initially bears the cost of discounts or refunds?
• If customer payments go to head office, when are they transferred to the franchisee’s business?
• If the opening is delayed, which payment obligations still begin as scheduled?

Türkiye has no dedicated franchising law, general registration system specifically for franchise agreements or mandatory standard pre-contract disclosure document. Do not assume that a ready-made statutory information pack will automatically be provided.

The relationship is governed by general legal provisions, notably the Turkish Code of Obligations No. 6098 and the Turkish Commercial Code No. 6102. The Industrial Property Law No. 6769 is relevant to trade mark use, while the Law on the Protection of Competition No. 4054 matters where competition restrictions are concerned. The absence of a specific disclosure requirement does not permit misleading information: the principle of good faith and pre-contractual liability may apply, depending on the circumstances. Keep dated, written records of statements that matter to your financing decision.

4. Match your financing to the payment schedule

Financing equipment that will be used for years with a short-term loan that needs repeated renewal can create repayment pressure before the business is established. Assess the loan term not just by the size of the instalments, but also by how long the funding is needed.

When comparing bank offers, look beyond interest rates to arrangement fees, insurance costs, security requirements and early repayment terms. Rather than assuming a repayment holiday removes interest, ask how interest accrues and how it affects later instalments. Compare the franchise agreement’s duration with the loan term as well.

Finally, model three scenarios: opening as planned, a delayed opening and a period of slower cash receipts. For each scenario, show the lowest cash balance, the additional funding required and whether that funding would genuinely be accessible. Having a credit limit is not the same as having unconditional access to the money.

Practical takeaway: Before signing, prepare a one-page funding summary showing the cash remaining after opening, the largest projected cash shortfall, your cash buffer and confirmed funding sources. If only optimistic sales expectations close the gap, the investment is not yet adequately funded.