Raising capital is a critical part of any business, and it can be especially challenging for franchisees and franchisors. Fortunately, there are several options available, notably Regulation CF crowdfunding. This regulatory framework, which was created as part of the JOBS Act, allows businesses to raise up to $5 million per year from a wide range of investors and introduced significant opportunities within the capital raising journey.
An Opportunity for Franchises
Regulation Crowdfunding, RegCF for short, is a securities regulation that allows companies to offer and sell securities to the general public through a crowdfunding portal. Since being passed into law just over 10 years ago, companies have raised over $1B in capital through this exemption.
Of course, there are also risks associated with investing through RegCF. As with any investment, there is always the potential that it may not gain the traction issuers anticipate and the desired capital may not be raised. However, if done carefully and with due diligence, RegCF can be an excellent way for franchisees or franchisors to raise capital.
Advantages of Reg CF for Franchisors and Franchisees
Several key points should be highlighted when it comes to the advantages of crowdfunding through Regulation CF for both franchisors and franchisees. Reg CF opens up a new way to raise capital for franchisors while retaining full ownership and control of their company. This is thanks to the lower investment minimums required and the ability to raise capital from both accredited and non-accredited investors. On the other hand, franchisees can use Reg CF to improve the reach of their franchise (with the approval of the franchisor) and raise the necessary capital to get their franchise off the ground or expand it.
When it comes to Regulation CF, there are a few key advantages that both franchisors and franchisees can enjoy, including:
- Lower investment minimums are one of the key selling points of Reg CF for both franchisors and franchisees. This means that issuers can raise capital from their fans, customers, and others who already support the company.
- The ability to raise capital from both accredited and non-accredited investors is another key advantage of Reg CF, which allows issuers to tap into a larger pool of potential investors.
- Improved reach is thanks to the fact that Reg CF allows for the use of social media and other online platforms to reach a wider audience of potential investors and increase the likelihood that an offering will receive the exposure needed to be successful.
Getting Involved in Reg CF
For franchisees and franchisors, the opportunities are plentiful with Reg CF. However, the main thing to remember is that to be successful in Reg CF campaigns, you need to have a great product with an even better message.
The first step is to get your product in front of potential investors. This can be done through several channels, including social media, online advertising, and PR. Once you have people interested in your product, it’s crucial to provide them with more information about why your product is worth investing in. This is where having a strong value proposition comes in. Once you have an audience for your product, you can begin the process of getting your offering qualified with the SEC and listing it on a funding portal.
Your value proposition should be clear, concise, and compelling. It should address the needs of your target market and explain how your product can meet those needs. Additionally, your value proposition should be supported by data and customer testimonials. These will help to show potential investors that your product is the real deal.
Finally, it’s important to remember that raising money through Reg CF is a team effort. To be successful, you’ll need to build a strong network of support. This includes family, friends, members of your target market, and a supporting team of key players from lawyers to broker-dealers and marketing professionals to help you reach your goal in the most efficient way possible.
Preparing for the Future with Reg CF
This regulatory crowdfunding framework offers numerous opportunities for early-stage businesses to raise capital from a large pool of investors. Through RegCF, startups and small businesses can offer securities to the general public, allowing investors of all income levels to participate in their growth. Franchising is a great way to expand a business and bring it to new markets. With RegCF, there is now an opportunity for franchisees and franchisors to raise capital from everyday investors through equity crowdfunding.
