Franchising is one of the most popular applications for the Rollover for Business Startup (ROBS) strategy. Franchises offer an established brand, proven systems, and ongoing support — and many franchise agreements require a significant upfront investment. For aspiring franchise owners who have accumulated retirement savings, ROBS provides a way to access that capital without taking on traditional debt.
Step 1: Choose the Right Franchise with Business Funding Trust. Begin by identifying franchises that match your interests, budget, and market. Many franchise brands publish their total estimated initial investment in their Franchise Disclosure Document (FDD). Review this document carefully to understand all costs — franchise fee, build-out, equipment, initial inventory, working capital, and more.
What You Need to Know
Step 2: Verify Your Retirement Savings Balance. Confirm the total amount available in your retirement accounts and determine how much you are willing to commit to the franchise. Remember to account for ROBS setup costs and any reserve you want to keep in your retirement plan.
Step 3: Form the C Corporation. Work with a ROBS provider to incorporate your franchise business as a C corporation in your state. The franchise will operate under this entity.
Step 4: Set Up the 401(k) Plan and Complete the Rollover. The new corporation establishes a qualified 401(k) plan. Your existing retirement funds are rolled into this plan, which then purchases stock in the corporation.
Step 5: Use the Capital for the Franchise Fee and Startup Costs. With your C corporation now capitalized, you can pay the franchise fee, fund the build-out, purchase equipment, and cover pre-opening expenses.
Step 6: Begin Operations and focus on franchise profitability.
ROBS and franchising are a natural match, and many major franchise systems have experience working with franchisees who use this funding method.
Ready to Take the Next Step?
Ready to explore whether your 401(k) can fund your entrepreneurial dream? Contact Business Funding Trust today for a free consultation. Our specialists can walk you through your options, help you understand the process, and lead you to a successfully funded business.
