Working Capital

Working capital refers to the funds available to a franchisee to cover the day-to-day operational costs of running the business, including payroll, inventory, utilities, and other short-term expenses. Franchisors typically outline the required amount of working capital needed for the first few months of operation in the Franchise Disclosure Document (FDD). Sufficient working capital ensures that a franchisee can meet cash flow needs and maintain operations while the business builds a customer base and generates revenue.