Optical franchise and joint-venture partner finance

In a conventional franchise you own the whole business and pay the franchisor fees for the brand and system. Most UK optical multiples that use partners work differently. Each store is usually its own limited company. The group holds one class of shares and provides the brand, buying, marketing, IT, training and support, for which the store pays fees. The local partners hold the other class of shares, sit as directors and run the store day to day. Typically one partner leads the clinical side and is a registered optometrist, and another leads retail and dispensing.

Partners are paid a salary for their work and share in profit through dividends on their shares, the two usual ways of taking money out of a limited company. The group's articles and shareholder agreement control almost everything that matters to a lender: what you can be paid, how the share price is set when you join or leave, whether shares can be charged as security, and what happens if you stop working in the store. Terms vary between groups and have changed over time, so the documents in front of you, not general descriptions, decide what a lender can do.

• Buying an outgoing partner's shares in an established store, at a price set by a formula or valuation in the shareholder agreement. This is the most common case, and the store's accounts give the lender real figures to work from.
• Founding a new store, where partners subscribe for shares and the store company funds its fit-out. There are no trading figures yet, so lenders lean on the group's track record with new openings and the partners' own experience.
• Increasing your stake when a co-partner leaves and the shares are offered to the remaining partner first.
• Joining a second store as a partner, which means the lender looks at both stores and your capacity to work across them.

Some agreements also ask partners to lend money to the store company or to keep a minimum level of capital in it. That is a separate commitment from the share price, and it should be built into your budget.

Where you borrow matters because repayments come out of what the store pays you. If you hold the shares personally and borrow personally, the loan is repaid from salary and dividends after income tax; HMRC explains how dividends are taxed. If your shares sit in your own holding company and that company borrows, dividends from the store company can usually be received by the holding company without further tax and used to repay the loan, leaving more of each pound available for debt service. Not every group's documents allow a holding company, and the set-up has accounting costs, so take advice from an accountant who knows the model before you agree the structure.

The main risk is the leaver clause. If you leave early, fall out with a co-partner or stop working in the store, the agreement may require you to sell your shares at a price set by formula, which can be below what you paid. The loan does not reduce to match. A personal guarantee given to the lender survives your departure from the store, so read our guide to personal guarantees and take independent legal advice on both documents together.

Dividends depend on decisions you do not fully control, including group pricing, central marketing and fee levels. Model your repayments on salary plus a cautious dividend, not last year's best figure. A smaller initial stake, a phased buy-in or a larger deferred element from the outgoing partner may be safer than borrowing the maximum on day one.