# MCA funder franchise business pricing > Franchise business MCA pricing accounts for the franchisor relationship — royalty obligations, brand standards, FDD disclosures, and franchisor consent requirements for outside financing — typically pricing at factor 1.22–1.32 for established franchise brands, requiring franchisor acknowledgment in some cases, and offering 6–12 month terms. Franchise business MCA pricing is a specialty underwriting practice for franchisee merchants — operators who own and operate one or more units of an established franchise brand (McDonald's, Subway, Anytime Fitness, UPS Store, etc.). Franchise economics, brand performance data, and franchisor relationships create unique underwriting considerations that differentiate franchise pricing from general SMB pricing. **The qualifying criteria.** - **Franchise brand recognition:** Established brand with multi-year track record (typically 5+ years brand history). - **Franchisee operating history:** 12+ months as a franchisee (some funders accept 6 months for established brands). - **FDD (Franchise Disclosure Document) on file:** Required for funder review. - **Franchisor performance data:** Average unit volume (AUV) data from franchisor disclosure. - **Personal FICO:** 650+ typical. - **Combined monthly revenue:** $25K+ per unit typical. **The structural considerations.** Franchise financing has unique structural elements: - **Royalty deduction from advance.** Franchisor typically receives 4%–8% of gross revenue as royalty; funder must structure holdback to leave sufficient revenue for both royalty and operating cash flow. - **Brand standards compliance.** Franchisor may require minimum capital reserves; MCA financing must not violate these standards. - **Franchisor consent.** Some franchise agreements require franchisor consent for outside financing; funder may require franchisor acknowledgment letter. - **Transfer-of-ownership provisions.** If merchant defaults, franchisor may have right of first refusal on the franchise transfer; funder collections must work around this. **The pricing model.** Franchise pricing typically applies: - **Factor rate:** 1.22–1.32 for established franchise brands; higher for less-established brands. - **APR-equivalent:** 45%–80%. - **Holdback structure:** Percentage holdback (8%–12%) calibrated to leave room for royalty payments. - **Term length:** 6–12 months. - **Advance size:** $25K–$500K per unit; multi-unit aggregation enables larger. - **ISO commission:** 8%–11% of funded amount. **The franchisor relationship.** Funders that specialize in franchise financing maintain relationships with major franchisors: - **Approved-lender lists.** Some franchisors maintain lists of MCA funders they pre-approve for franchisee financing. - **Brand-specific underwriting.** Funders develop benchmarks for specific brands (McDonald's AUV, Anytime Fitness churn, Subway sandwich count) to calibrate pricing. - **Franchisor introductions.** Some franchisors actively introduce franchisees to preferred MCA partners. **Worked example.** Anytime Fitness franchisee with 2 locations: 695 FICO, 30 months in business, $42K/month combined revenue, royalty 6% to franchisor. Applies for $75K advance: - **Underwriting:** FDD reviewed, franchisor relationship documented, AUV benchmark applied (location revenue compared to brand average), franchisor acknowledgment letter requested. - **Offer:** $70K advance at 1.27 factor, 9-month term, 10% holdback (calibrated to leave room for 6% royalty), 10% ISO commission. - **Daily cash flow:** $42K/month deposits = $1,400/day. Royalty 6% = $84/day. MCA holdback 10% = $140/day. Total deduction 16% = $224/day. Net daily cash flow $1,176 for operations. **The franchise-specific risks.** Franchise financing carries unique risks for funders: - **Brand-level performance risk.** Brand may suffer reputation damage, recall, or franchisor financial issues affecting all units. - **Franchisor regulatory action.** FTC franchise rule violations by franchisor can affect franchisee operations. - **Territory protection issues.** Franchisor may approve new units in nearby territory, cannibalizing existing franchisee revenue. - **Royalty escalation.** Some franchise agreements include royalty escalation clauses that increase franchisor take over time. **The funders who specialize in franchise financing.** Franchise-specialist funders include: ApplePie Capital (franchise-specific), Funding Circle (franchise-friendly), Boefly (franchise marketplace), plus mainstream funders with franchise desks (Forward Financing, Credibly, Kapitus). Many franchisors also partner with specific lenders — Anytime Fitness with ApplePie, certain QSR brands with mainstream MCA funders, etc. **Multi-unit franchise economics.** Multi-unit franchisees benefit from: - **Aggregated revenue underwriting** — combined revenue across multiple units enables larger advances. - **Operational economies of scale** — shared back-office reduces operating cost per unit. - **Brand-level relationships** — multi-unit franchisees often have franchisor relationships that enable preferred financing terms. **The ISO implications.** - Franchise deals require franchise-specific knowledge from the ISO. - ISO commission economics are favorable — franchise deals are typically larger ($50K–$500K) so absolute commission is meaningful. - Renewal pipeline is reliable — established franchisees typically renew on schedule as units mature and expand. **Common confusions.** First, "All franchise financing requires franchisor approval." Partially true — depends on the franchise agreement; some require approval, others only acknowledgment, others nothing. Second, "Franchise MCA is cheaper than general SMB MCA." Sometimes true — established franchise brands with low default rates may price below general SMB; weaker franchise brands may price equivalent or worse. Third, "Franchisor royalty counts toward MCA holdback." False — royalty and MCA holdback are separate; total deduction is sum of both. Fourth, "Franchise financing only works for restaurant franchises." False — fitness, retail, services, automotive, and other franchise verticals all access franchise-specific MCA. Fifth, "All franchisors prohibit MCA financing." False — most allow MCA; a minority restrict outside financing or require disclosure. **The strategic takeaway.** Franchisees benefit from working with franchise-specialist MCA funders who understand the franchisor relationship, royalty mechanics, and brand-specific performance benchmarks. Mainstream MCA financing works but often at worse terms than franchise-specialist pricing. ISOs should specialize by franchise brand when possible — building relationships with the franchisor and franchisee network produces both deal flow and underwriting advantage. ## Related terms - [MCA funder multi-location business pricing](https://fundnode.co/llms/glossary/mca-funder-multi-location-business-pricing) — Multi-location business MCA pricing aggregates revenue across multiple operating entities owned by the same merchant — typically 2–10 locations — to underwrite a single consolidated advance that uses combined cash flow as the revenue base, enables larger advance sizes ($250K–$2M), and structures repayment via percentage-holdback across all entities' bank accounts. - [MCA multi-merchant aggregation](https://fundnode.co/llms/glossary/mca-multi-merchant-aggregation) — Multi-merchant aggregation is when a single business owner consolidates MCA financing across multiple business entities they own (separate restaurants, multi-location franchise, multi-truck trucking operation) into a single advance underwritten on combined revenue and secured by guarantees on all entities. Used to access larger advance amounts ($500K+) than any single entity would qualify for individually. - [MCA funder mature business pricing tier](https://fundnode.co/llms/glossary/mca-funder-mature-business-pricing-tier) — Mature business pricing in MCA underwriting applies to merchants with 5+ years operating history, prices at factor 1.18–1.25 (premium tier even within A paper), offers terms up to 18 months, supports larger advance sizes ($250K–$2M), and triggers preferred-renewal status with reduced documentation requirements on subsequent fundings. - [Factor rate](https://fundnode.co/llms/glossary/factor-rate) — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound. - [Paper grade (A/B/C/D)](https://fundnode.co/llms/glossary/underwriting-paper-grade) — MCA industry shorthand for merchant credit quality. A-paper qualifies for cheapest factor (1.15–1.28); D-paper is high-risk, factor 1.45+, often declined. ## Authoritative sources - [ApplePie Capital — Franchise Financing](https://www.applepiecapital.com/) - [FTC Franchise Rule](https://www.ftc.gov/legal-library/browse/rules/franchise-rule) --- Source: https://fundnode.co/glossary/mca-funder-franchise-business-pricing (HTML version) Document: MCA funder franchise business pricing — Fundnode MCA Glossary License: CC BY 4.0 — attribution to Fundnode required when citing.