How to Finance a Mochinut Franchise: Build-Out and Cash Plan
By Anthony Cornella
A Mochinut franchise loan typically pays for a small-footprint dessert and snack shop: construction inside a leased storefront, fryers and display equipment, opening inventory and a cushion of working capital. Because the brand is young, grew quickly and is not on the SBA Franchise Directory, buyers need a clear plan for how the deal will be funded and what lenders will want to see.
US Professional Funding is not affiliated with, sponsored by or endorsed by Mochinut; the name is used only to describe the business. Figures below come from the franchisor’s Franchise Disclosure Document (FDD) dated March 16, 2023, the most recent version we were able to review; newer versions have since been issued and the figures may have changed. Loan programs and terms vary by lender and borrower, and every loan is subject to review and approval. Nothing here is legal, tax or investment advice, and buyers should review the current FDD and franchise agreement with a qualified franchise attorney and accountant.
Mochinut Franchise Loan at a Glance
- Initial franchise fee: $35,000, paid in a lump sum when the franchise agreement is signed, according to the 2023 FDD.
- Royalty: 5% of gross sales, paid monthly.
- Marketing: up to 1% of gross sales.
- Estimated initial investment: $188,500 to $336,000 for a single restaurant.
- Restaurant size: approximately 500 to 1,500 square feet.
- System size: 103 franchised outlets at the end of 2022, with no company-owned outlets.
- Term: 5 years, with one renewal term of 5 years.
- Franchisor financing: none.
- SBA Franchise Directory: not listed, so conventional financing is the primary route.
What Is Mochinut?
Mochinut sells mochi donuts, which blend a Japanese-style rice cake texture with an American doughnut, along with Korean-style crispy corn dogs made with rice flour and a range of beverages. The franchisor, Mochinut Franchise, Inc., is a California corporation formed in 2021 and based in Los Angeles. According to the 2023 FDD, franchised units were first offered under license agreements beginning in 2020, and an affiliate owns the Mochinut trademark.
Store format. The 2023 FDD describes restaurants of roughly 500 to 1,500 square feet, generally in leased retail space. The small footprint keeps rent and build-out lower than a full-service restaurant.
Rapid growth. The system grew from license agreements first offered in 2020 to 103 franchised outlets at the end of 2022, with no company-owned outlets, according to the 2023 FDD.
Regulatory history. The franchisor and an affiliate have entered into consent orders with state franchise regulators relating to franchise sales, registration and record-keeping practices. Buyers and lenders should read Item 3 of the current FDD carefully and ask the franchisor how those matters were resolved.
Why lenders view it the way they do. Lenders see a low-cost concept with a trend-driven menu, a young franchisor with no company-owned restaurants, a short franchise term and no SBA listing. Those factors push lenders to lean heavily on the borrower’s personal strength, the lease and the location rather than the brand alone.
Mochinut Franchise Costs
Initial franchise fee. The 2023 FDD sets the fee at $35,000, due in a lump sum at signing and generally non-refundable. The FDD notes the franchisor may reduce or waive fees in some situations, including for franchisees opening multiple restaurants.
Real estate and build-out. Mochinut restaurants are generally leased. Security deposits and initial rent are estimated at $15,000 to $40,000, and construction, design and architectural costs at $70,000 to $150,000, the largest line in the budget.
Equipment and fixtures. Equipment, furniture and fixtures are estimated at $35,000 to $40,000, plus $2,000 to $3,000 for cash registers and office equipment.
Opening costs and working capital. Opening inventory, insurance, licenses and deposits, training expenses and grand opening promotion all come before the first sale, along with $10,000 to $30,000 in additional funds for the first three months.
Total investment. The 2023 FDD estimates a total initial investment of $188,500 to $336,000 for a single restaurant, made up of these Item 7 line items:
- Initial franchise fee: $35,000
- Real estate security deposits and initial rent: $15,000 to $40,000
- Construction, design and architectural: $70,000 to $150,000
- Equipment, furniture and fixtures: $35,000 to $40,000
- Opening inventory: $13,000 to $20,000
- Insurance: $1,000 to $4,000
- Opening promotion and grand opening: $3,500 to $6,000
- Cash registers and office equipment: $2,000 to $3,000
- Licenses, utility deposits and prepaid fees: $2,000 to $5,000
- Initial training expenses: $2,000 to $3,000
- Additional funds for three months: $10,000 to $30,000
Because newer FDDs have been issued since 2023, compare these figures with the current Item 7 before building a budget. Construction costs in particular vary widely with the condition of the space and local labor costs.
Ongoing Fees and How They Affect Your Loan
Royalty. The royalty is 5% of gross sales, paid monthly by electronic funds transfer.
Marketing. The 2023 FDD provides for a marketing contribution of up to 1% of gross sales and notes that a marketing fund had not yet been established at that time.
Required purchases. Franchisees must buy proprietary and branded products and certain equipment from designated suppliers, which include the franchisor and its affiliate. The FDD estimates required or specified purchases at about 60% of startup purchases and 75% to 85% of ongoing purchases.
Other fees. The 2023 FDD lists a $15,000 renewal fee, a $2,500 transfer review fee and a $5,000 transfer fee, plus additional training at $100 per hour per instructor.
How lenders factor these costs in. Royalty and marketing together take up to 6% of sales before rent, labor, ingredients and loan payments. Lenders build projections from realistic sales assumptions, subtract those fees and rent, and test whether cash flow still covers debt service with a margin to spare.
Franchisor Requirements for New Owners
The 2023 FDD sets out several practical requirements that affect financing.
- Training: initial training lasts about one week, with 11 hours of classroom instruction and 29 hours of on-the-job training. The franchisee pays travel, lodging, meals and wages.
- Approved suppliers: most ongoing purchases come from designated or approved sources.
- One location per agreement: the franchise covers one restaurant at the approved location unless the franchisor agrees otherwise in writing.
- Territory: franchisees receive a non-exclusive territory defined by a radius that varies by urban, suburban or rural setting, and the franchisor reserves certain channels and venues.
Confirm any net worth or liquid capital expectations directly with the franchisor, since we could not verify them from the franchisor’s own materials.
Ways to Own a Mochinut
A new restaurant. Most owners open a new store in leased space. Lenders underwrite on projections, the lease, the build-out budget and the borrower’s personal finances. Our franchise start-up financing page explains how we approach new openings.
Buying an existing restaurant. With more than 100 outlets open by the end of 2022, resales are possible. A buyer needs franchisor approval, must complete training and pay the transfer fees, and signs a transfer agreement with a general release. Historical sales give lenders something concrete to underwrite. Our article on buying a franchise resale covers the process.
Multiple restaurants. Each agreement covers one location, but the FDD notes fee reductions may be available for franchisees opening multiple restaurants. Our article on multi-unit franchise financing explains how lenders approach growing operators.
Financing Options for a Mochinut Franchise
Conventional term loans. For most buyers, the Mochinut franchise loan itself is a conventional business loan. Lenders typically size the loan to projected cash flow and require a meaningful cash contribution, a personal guarantee and collateral.
SBA 7(a) loans. The SBA 7(a) program is widely used for franchises, but SBA lenders generally require the brand to be on the SBA Franchise Directory. See the SBA section below.
SBA 504 loans. The 504 program is built for owner-occupied real estate and long-lived fixed assets. Because Mochinut restaurants are small leased storefronts, 504 rarely fits.
Build-out financing. Construction is the largest cost, and it is the hardest to finance because leasehold improvements have little resale value. Lenders look closely at contractor bids, the lease term and landlord contributions. Our article on restaurant build-out financing explains the options.
Equipment financing. Fryers, mixers, proofing and holding equipment, refrigeration, display cases and beverage equipment can often be financed separately and secured by the equipment. See our restaurant equipment financing and leasing options.
Working capital and lines of credit. A line of credit can cover the opening months, inventory and slower periods. Learn more about restaurant working capital.
Franchisor financing. The 2023 FDD states that the franchisor does not offer financing, directly or indirectly, and does not guarantee franchisee obligations.
Seller financing on resales. When buying an existing store, a seller may carry part of the price. A seller note must be acceptable to the senior lender and is typically subordinate to it.
SBA Loans for Mochinut Franchisees
SBA lending for franchises runs through the SBA Franchise Directory, a list of brands whose franchise agreements have been reviewed for SBA eligibility. SBA lenders generally need a brand to be listed before making an SBA-guaranteed loan to one of its franchisees.
Mochinut is not on the SBA Franchise Directory. In plain terms, SBA 7(a) and 504 loans are generally not available for a Mochinut franchise as things stand, and buyers should plan on conventional and equipment financing. The absence of a listing is not a judgment about the brand, and directory status can change, so confirm it when you apply. If Mochinut were ever added, the SBA 7(a) program maximum is currently $5 million, though program rules can change.
How Lenders Evaluate a Mochinut Deal
Every Mochinut franchise loan request is reviewed on the same core factors.
Personal credit and financial history. Lenders review credit, tax returns and a personal financial statement, and a personal guarantee is standard.
Net worth and liquidity. Without SBA support, lenders usually expect a larger cash contribution and solid reserves after closing. Our article on how much franchise you can afford walks through the math.
Restaurant experience. Food service or retail management experience strengthens a request, especially for a first-time owner.
Business plan and projections. Projections should reflect the specific location, foot traffic, nearby competition, staffing and the ramp-up period. Lenders will discount optimistic assumptions for a trend-driven menu.
The FDD and franchise agreement. Lenders pay close attention to the 5-year term, renewal conditions, the non-exclusive territory, Item 3 regulatory history and the fact that the FDD contains no financial performance representations. Our guide to how lenders read a Franchise Disclosure Document explains which items matter most.
The lease. The lease term should cover the loan term, and renewal options matter because the franchise term is short. Landlord improvement allowances can reduce the amount borrowed.
Historical financials for resales. Expect to provide the seller’s sales reports, profit and loss statements and tax returns.
The Short Term and Its Impact on Financing
The 2023 FDD sets a 5-year initial term with one renewal term of 5 years. Renewal requires substantial compliance, possible remodeling at the franchisee’s expense and signing the then-current franchise agreement. A short term matters to lenders because the loan should be repaid while the franchise is in force. Buyers can respond by keeping the borrowed amount modest, choosing a loan structure that fits within the term, and planning for renewal costs. For a resale, the remaining term on the seller’s agreement is a key part of the price and the financing.
Real-World Scenarios
A first-time owner opening in a strip center. A buyer with retail management experience signs a lease with a landlord improvement allowance, finances the build-out and equipment with a conventional loan and an equipment lease, and keeps savings as working capital.
An existing restaurant owner adding a dessert concept. An operator with a profitable restaurant opens a Mochinut nearby. The lender looks at combined cash flow and the operator’s track record.
A buyer purchasing an open store. A buyer acquires an operating restaurant with several years remaining on its term. The lender reviews actual sales and the remaining term, and the seller carries a small subordinate note.
Common Mistakes to Avoid
- Relying on an older FDD instead of the current version
- Assuming an SBA loan will be available for a brand that is not on the SBA Franchise Directory
- Borrowing on a schedule that outlasts the 5-year franchise term
- Underestimating construction costs in a second-generation space
- Skipping Item 3 and the franchisor’s regulatory history
- Signing a lease shorter than the loan
For more pitfalls in food businesses, read the restaurant loan mistakes that cost owners the most.
Next Steps to Finance Your Mochinut Franchise
Step 1: Get the current FDD. Review fees, Item 3, Item 7, Item 12 and Item 17 with a franchise attorney and accountant.
Step 2: Line up your capital. Document the cash you will contribute and the reserves you will keep after opening.
Step 3: Secure a site. Negotiate a lease with a term and renewal options that fit the loan and the franchise term.
Step 4: Get build-out bids. Obtain contractor bids and equipment quotes so the budget is based on real numbers.
Step 5: Build projections. Model sales, labor, rent, royalty and marketing by month. Our conventional loan calculator can help with early payment estimates, which are for planning only and are not an offer or approval.
Step 6: Apply and close. Submit your personal financial statement, tax returns, projections, lease and franchise documents.
Mochinut Franchise Loan FAQs
How much does it cost to open a Mochinut?
The 2023 FDD estimates $188,500 to $336,000 for a single restaurant. Check the current FDD, since newer versions have been issued.
What is the Mochinut franchise fee?
The 2023 FDD sets the initial franchise fee at $35,000, paid in a lump sum at signing.
What royalty does Mochinut charge?
The royalty is 5% of gross sales, plus a marketing contribution of up to 1% of gross sales, according to the 2023 FDD.
Can I get an SBA loan for a Mochinut?
Mochinut is not listed on the SBA Franchise Directory, and SBA lenders generally require a listing, so conventional and equipment financing are the usual routes.
Does Mochinut offer financing?
No. The 2023 FDD states that the franchisor does not offer financing directly or indirectly.
How long is the Mochinut franchise term?
The initial term is 5 years with one renewal term of 5 years, subject to conditions and a $15,000 renewal fee.
How big is a Mochinut restaurant?
The 2023 FDD describes restaurants of approximately 500 to 1,500 square feet.
Do I get an exclusive territory?
No. The 2023 FDD provides a non-exclusive territory defined by a radius around the restaurant.
Can I finance the equipment separately?
Often, yes. Fryers, refrigeration, display cases and beverage equipment can usually be financed with equipment loans or leases.
Can I buy an existing Mochinut?
Yes, subject to franchisor approval, training, a $2,500 transfer review fee and a $5,000 transfer fee.
Does Mochinut publish financial performance information?
The 2023 FDD does not include financial performance representations. Check Item 19 of the current FDD and rely on actual financial statements when buying an existing store.
Final Thoughts
A Mochinut franchise loan is modest by restaurant standards, but the short term, the non-exclusive territory and the lack of an SBA listing mean buyers need a stronger personal contribution and a tighter plan than with many larger brands. Start with the current FDD, negotiate a lease that fits the term, and keep reserves for the opening months.
US Professional Funding helps franchise owners and buyers finance acquisitions, equipment, working capital and refinancing for established brands. Learn more about our franchise financing and restaurant financing solutions.
