The Ultimate Guide: How much money do I need to buy a franchise?

FAQs: February 24, 2020

How much money do I need to buy a franchise?

So you want to join the 80,000+ franchisees operating in Australia and buy a franchise? When looking at businesses for sale, it’s important to know what questions to ask before entering a franchise, and do your due diligence. Part of this involves considering the different expenses and start-up fees for franchises on the market.

It’s true that franchise start-up fees can be higher than the costs of starting your own business from scratch. However, trends show that franchise businesses are more likely to succeed. Additionally, you’ll get the type of head office support that’ll save you a lot of time and money in the long run.

With that in mind, let’s look at the process of buying a franchise in Australia, and how much money you’ll need to buy one. 

What to expect when you’re buying a franchise

The exact process of buying a franchise will vary from franchisor to franchisor. And the length of time it takes depends largely on how quickly you and the franchisor move through the purchase process. 

For example, if you decided to buy a Chicken Treat franchise, it would take approximately six to 12 months before you actually stepped into your store. This is from the moment you start to research Chicken Treat as a potential option to your first trading day, and all that has to happen in between. 

In a nutshell, the general buying steps for most franchises are:

How much money do I need to buy a franchise?

  • Do your research: It’s crucial to research any franchise agreement in detail before you jump into it. You need to ask yourself and your potential franchisor many questions before you enter into an agreement with them.
    To evaluate the best franchise opportunity for you, you need to spend enough time upfront getting answers to the right questions.

  • Apply to be considered: Not everyone is a good fit for every franchise. So once you’ve identified the franchise that’s best for you, you’ll need to apply to the franchisor to be considered as a viable franchisee.

  • Complete the approval process: If they accept your application, you’ll meet with their sales team. At this point, you’ll be able to ask them all the operational and other questions you have. 

    During this stage (or at least 14 days before you sign an agreement or make a non-refundable payment), the franchisor must also give you:- a copy of the Franchising Code of Conduct 
    – a Disclosure Document relating to their franchise that includes information to help you make a reasonably informed decision about whether to buy it
    – the finalised franchise agreement (not a draft).

  • Apply for funding: Banks may be more likely to provide lending for franchise businesses than to new standalone businesses, because of a successful franchisor’s previous performance. Ask your potential franchisor if they can help with your loan application.

  • Sign the franchise agreement and lease: A franchise agreement sets out each party’s rights and responsibilities in relation to the franchise business, as well as to each other. Because both leases and agreements are legally binding documents, ensure you’ve done your due diligence and sought legal advice for this step.

  • Induction and training: Success in business is a team effort, and professional franchisor training programs will fully induct you. This means you’ll learn everything you need to know – from the key policies and budgeting, to on-the-job training in how to run your franchise restaurant.

    Training should help you to develop a clear strategy that aligns to your goals as a franchisee. It should include learning how to financially manage a business and how to execute your
    business plan.
     

    Chicken Treat’s 10-week induction program is great if you’ve never owned a small business or led people before. It also maps to the Australian qualifications framework to deliver the equivalent of nationally recognised small business and retail qualifications.

  • Open your business: When you become a franchisee, you’re joining an extensive network that’s always ready to support you. When you open your store, you’ll be able to tap into knowledge and advice not only from the franchisor, but also from other franchisees.

    And because your success is also the franchisor’s success, you’ll have access to a robust, ongoing support system that starts the moment you do.

Is owning a franchise worth it?

There are currently close to 1,160 franchisors and about 80,000 franchises all around Australia. It’s all worth about $182 billion per annum – and that’s only increasing. As an industry, it’s certainly worth considering!

Buying a franchise is a significant monetary investment, however, so it’s not a decision to jump into lightly.

That said, there are several benefits of buying a franchise compared to starting an independent, standalone business. Here are four of the top ones:

  1. The franchise sector is growing

Australia has one of the strongest franchise markets across the globe. The latest studies from Franchise Council of Australia Limited (FCA) show that it’s about a $182 billion sector in Australia.

  1. Existing brand trust and recognition make business easier

Selling products and services with a recognisable brand name attached can really help to get your business off the ground. Leveraging a professional, established franchisor’s image means you can start with a customer base that already recognises, trusts and loves your brand. 

It also means you benefit from a successful franchisor’s knowledge and experience, as well as the rights to their brand. You’ll get full access to their trademarked materials, including logos, slogans, and signage – essentially, anything to do with their brand. 

  1. You’ll still be your own boss 

Being a franchisee is different to starting (or buying) your own independent small business – but that doesn’t stop you from calling the shots. You still manage the schedule – but you run the show according to a tried and tested formula. 

And by following your franchisor’s formula and systems, you increase your chances of business success.

  1. You get access to a proven business system

When you open a franchise, you’re not just buying the franchisor’s brand materials. You’re also buying the right to use their proven business system, which includes proven prices, products, and marketing techniques. 

This removes all the guesswork and trial and error, and significantly reduces the time and energy you’d need to build a standalone business from the ground up. 

Chicken Treat: How much money do you need to buy a franchise?

In order to buy any franchise and get funding from your bank, you need a certain amount of capital behind you. For a Chicken Treat franchise, regardless of whether you’re buying a new or existing site, you’d need to pay craveable brands (the company that franchises the Chicken Treat brand) a:

  • $12,500 training fee
  • $10,000 administration fee
  • $40,000 new franchise fee.

Further fit-out costs for your business will depend on how you’ve configured your store. For example:

  • Shop front startup costs are typically approximately $350,000-$500,000 excluding GST. 
  • Drive-through startup costs come in at approximately $600,000-$700,000 excluding GST.

While this is a considerable amount to invest initially, remember that buying a franchise can help to keep other costs down. We’ve already talked about the money you’ll save through the franchisor’s proven systems. In addition to these savings, you can often buy products and produce in bulk, and your management team will negotiate your overheads as part of your lease agreement.

An iconic brand: Buy a Chicken Treat franchise

Have you decided that a franchise business will suit your lifestyle and business goals? If so, and you want to be part of an iconic brand with a passion for food and people, a Chicken Treat franchise might be the right fit for you. 

Interested in knowing more?  Talk to Leisha from our Franchising Team today: 

Leisha Fontana – Leisha.Fontana@craveablebrands.com – 0408927750