Starting or Buying a Franchise

Starting a New Franchise

Which business is right for you? With the thousands of choices out there it is hard to know which to choose. Three things to look at in narrowing down your choice of franchise are:

1. Yourself and your preferences

Think about the kind of businesses that interests you as you are more likely to work hard at something you enjoy. Are you better suited to a retail business selling to consumers or is selling to other businesses more your preference? Are there particular industries that you have experience in? How do you feel about working evenings or weekends? These are some of the things to consider when short-listing franchises that interest you. The Franchise Council of Australia www.fca.com.au is a good place to start in looking at options.

1. The size of your investment

What level of investment are you comfortable with? Go through your funding requirement carefully and discuss with the franchisor to ensure you have allowed for any contingencies and ensure you have sufficient working capital.
Two important factors contributing to the value of a business are the certainty of and the amount of income generated by the business. The greater the certainty and the greater the income the more valuable the business. For this reason many people select accredited franchises that enable them to obtain franchise financing in addition to the standard financing they would otherwise obtain. By doing so they are able to secure more finance which means they can purchase a more valuable business.

1. The strength of the franchise system

Whether you are buying a well established Gloria Jean’s Franchise, Kwik Kopy Franchise or a newer and lesser established franchise, you need to thoroughly research your choices.
Talk to the franchisor and find out as much information about them as you can. Some questions to ask are:

1. Are they a member of the Franchise Council of Australia (FCA)?
2. What training do they offer?
3. What territory will you be offered and can it be changed?
4. What fees and royalties will they charge? How do they spend any marketing levies?
5. Who do they see as their future competition and why?
6. What are the franchisor’s future plans to stay ahead of the competition?
7. What is the average financial performance of their franchises?
8. How many franchisees do they have? What is the success rate?
9. Is the parent company financially strong? Do they have an annual report your accountant can review?

Talk to franchisees to see if their experiences are positive and whether they match what you have been told by the franchisor and verify what you have been told about earnings potential.

Buying an Existing Franchise

For most people buying a franchise or business is a life changing decision for them. Getting it right can have a huge impact on their quality of life, be it a financial impact or the impact on their lifestyle. The added certainty when purchasing a well know and proven franchise branded business is why so many people choose this path and why the franchise industry has grown so significantly over the past few decades.
How to value the business?
Are the figures reliable?
How to get franchise finance?
These are important questions you will need to answer before proceeding with the purchase. With years of experience helping people get into new businesses and for many, seeing their dreams come true, calling Franchise Finance Professionals is an excellent place to start in trying to answer these questions. With an excellent team of professionals and experts we can recommend, you will be in safe hands.

Franchise Loans and Funding Options

Many people don’t have the cash reserves necessary to start or purchase a business and therefore seek to finance part of the cost. Alternatively, many people look to obtain franchise financing to purchase a more valuable in order to achieve a greater or more secure income.
There are numerous was of financing a franchise. The most common involves borrowing against the equity in your residential or commercial property.
Using the franchise as security: Perhaps a method that is not quite as will know involves borrowing using the franchise itself as security. There are a number of franchise systems today that banks are prepared to lend against with the ability to borrow even up to 70 percent of the value of the most favoured franchise brands. The bank’s willingness to lend against selected franchises is testimony to the quality of those particular franchise systems. Each bank has a different list of accredited franchise systems so feel free to give Franchise Finance Professionals a call to find out who will lend to whom.
Other was to finance the business might involve using a guarantor for the finance, equipment financing such as leases, invoice financing or financing through the franchisor.
The cost for each of these methods of financing can vary greatly depending on your circumstances, the choice of lender and how you approach the lender to get franchise finance. This is where a specialist franchise finance broker can make all the difference. Having a Franchise Finance Professionals structure your finance application and negotiate with the lenders on your behalf makes all the difference. Using our experience to secure the best franchise financing outcome makes sense just like it does to use the expertise of an accountant to get the best tax return possible.

Tips for Choosing a Franchise

The first step to choosing a franchise is to examine your own preferences, skills and motivations. Are you better at business to business communication or retail, what days and hours are you happy to work, what industries appeal or do you have experience in? Answering such questions will help in choosing a franchise shortlist.
Now you have a shortlist it’s time to talk to the franchisors and their franchisees. Check if they are a member of the Franchise Council of Australia (FCA) and go over their disclosure document. Prepare a list of questions to ask. Questions such as:

1. What ongoing assistance do they offer? Is there any special assistance if you experience difficulty?
2. What fees will I pay to the franchisor and what are they comprised of e.g. royalties, advertising, etc…?
3. What training do they offer?
4. What is the financial health of the franchisor?
5. How do they allocated territories and what protection do you have against them establishing additional franchises in your area?

Spend time talking to existing franchisees. Have their experiences been positive and has the business generated the levels of returns you are expecting. How do they find the franchisor.
Lastly, engage the right professionals to assist you. Make sure your accountant, solicitor and financial representative have solid experience in franchising.