What financial requirements do franchisors set for buyers?

Buyers approach a franchise resale the way they would approach any business purchase — arrange the financing, agree the price, close. A franchise adds a second gatekeeper with its own criteria, applied to the buyer personally, and it is not unusual for the franchisor’s test to be the harder of the two.

Liquid capital is the requirement that surprises people

Franchisors typically require a minimum of liquid capital — cash and readily realisable assets — that is genuinely yours and not borrowed. The reasoning is operational rather than obstructive: a franchisee who has borrowed every dollar of the purchase price has nothing left for working capital, and a location that runs out of cash in month four damages the brand in that market for years.

Net worth is tested separately

Alongside liquid capital, most systems set a total net worth floor. Home equity and registered savings usually count toward it even though they would not count as liquid. The two tests do different jobs — net worth asks whether you can absorb a bad year, liquid capital asks whether you can fund the opening months — and a buyer can pass one and fail the other.

Approval also covers things money cannot fix

Franchisor approval is rarely purely financial. Industry or management experience, willingness to work in the business rather than hold it as an investment, completion of the system’s training, and a credit and background check are all common. Multi-unit systems often look for operational depth a first-time buyer cannot demonstrate, regardless of capital.

Find out the thresholds before you negotiate the price

The sequence matters. A buyer who agrees a price, spends on diligence, and then discovers the franchisor requires more unborrowed cash than they hold has lost the money and the time. Ask the franchisor directly for its current buyer criteria early, and make the purchase agreement conditional on franchisor approval so a refusal does not leave you committed.