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If you are planning to franchise in New York, you will need to meet certain franchise capitalization requirements to franchise your business. By meeting these requirements, you will show your ability to provide services and support to your franchisees. If you don't meet the franchise capitalization requirements, your franchise registration may be denied.
The purpose of franchise capitalization requirements is to prevent an undercapitalized franchisor from going into business, as well as to prevent them from selling more franchises than they are capable of servicing. If you are planning to franchise in New York, and you have questions about the state's franchise capitalization requirements, you can get the professional advice of a New York franchise attorney.
How will New York determine my franchise capitalization requirements?
There is actually very little explanation of the criteria used to determine franchise capitalization requirements. One way to assess this is to figure your minimum capital needs for your franchise in New York. You can do this by estimating your per-unit cost of providing promised pre-opening and opening services and support, and multiply that by the number of franchises that you plan to sell in New York in the next year.
When registering to franchise in New York, you must report these costs, as well as your projected sales estimates. Then, these numbers will be compared with the resources reported in your business' financial statements. In any case, your liquid assets must at least be equal to the amount of capital you will need.
A state examiner may base their requirements upon several of your needs. These franchise capitalization requirements are not only necessary for your registration to franchise in New York, but also upon renewal of your franchise license. Upon renewal there will be much less scrutiny of your New York franchise capitalization requirements.
To meet these requirements upon registration or renewal of your franchise in New York, you can get the help of an experienced New York franchise attorney.
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