How to buy a franchise business

According the most recent Franchising New Zealand report (2017) around 185 new franchise brands entered the New Zealand market in the five years prior. The franchise sector in New Zealand is strong. It has a long history and it is only getting stronger.  

Why? The model works well and franchises are often a low risk business option. 

With many options out there, you’ll need to do your homework to find the right one for you. Look for one that fits your strengths, skills, personality, budget and lifestyle. There’s a lot to consider and it pays to be as objective as possible so you can accurately evaluate where your strengths and weaknesses lie, and what type of business will best suit your needs.  

So how do you buy a franchise business?

1. Know yourself

What will you bring to the table and how it will contribute successfully running a franchise? What type of work do you enjoy? What skills do you have? How can you apply your previous experience? Have you got sufficient funds? Will this business support the lifestyle you want? Really understanding your strengths, weaknesses and goals will make it easier to determine what type of franchise best suits your needs.

2. Cast your net wide

When researching franchise opportunities keep an open mind. You may have an idea in head, but you don’t know what you don’t know. There could be a franchise you haven’t considered that will provide everything you want. By being open to a variety of franchise opportunities, you are more likely to find one that best suits your needs. Make sure research the sector, operating model, territory, capital required, and demand before making any decision.

3. Investigate

When you are doing your research, here are the sorts of things you should be thinking about: How successful is the franchise system? Will it provide you with the tools, know-how and support you will need? Are the fees reasonable and is there an ongoing royalty or termination costs? Does it have good reputation to trade on? If it’s a new franchise research the new area and how long it will take to get up to speed. If it’s an existing franchise (a resale), research its customer base and cash flow. 

4. The Agreement

Check the Franchise Agreement and disclosure documents thoroughly and highlight any questions or concerns before having an experienced franchise lawyer go over your shortlist of A franchise lawyer will alert you to any problem areas, and help guide you towards the franchise that would work best for you.

5. Get cosy with the franchisor

Having narrowed down the field, it’s time to meet with the franchisor. Make a list of your questions about the franchise and, if possible, get some hands-on experience to see how the franchise operates. When you’re done, you should have a solid understanding of what to expect and you will be more prepared to make an informed decision.

6. Drop in on other franchisees

Before signing a franchise agreement, contact some of the current operators in the franchise you are considering to get their overall impression of the organisation. Find out how the business works for them, any issues or concerns they have, and how support is available from the franchisor.

7. Decision time

Be realistic and clear about how what capital you will need to support the business while you get it up and running. Get advice from others – talk to franchise consultants, franchise lawyers and franchise accountants. Be realistic with your expectations and the amount of work you will need to do. Be clear on what the franchisor will provide and what you are getting for your money.

8. Lastly ensure this franchise will work for you – personally and professionally.

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