Step 1. Identify what sort of franchise you want
It might seem simple, but the fact is, it’s a lot harder to succeed in business if you don’t care about what you’re selling. Think about the types of industries that appeal to you, then find out what’s available to buy.
A business broker can help you with this process. There are also a range of online sources such as Franchise New Zealand, and online marketplaces like NZ Biz Buy Sell and Trade Me.
Step 2. Establish how much you can spend
Franchises vary in their initial entry costs and their ongoing costs. Work out what sort of franchise you can afford and whether you’ll need finance.
This is a good time to engage with your accountant and an ANZ Business Specialist. They’ll help you consider some of the typical costs, such as:
- Initial fee – the franchise ‘right’ and initial training
- Set-up costs – the establishment costs of the business, such as shop fit-out, stock, signage, and equipment
- Royalties or franchise fees – typically calculated as a percentage of the franchisee’s turnover
- Marketing or advertising fees
- Other ongoing fees, such as training or insurance.
Remember, costs can vary widely between franchise systems depending on factors such as location, size, and rent. What you know about one franchise might not be useful when looking at another, even if it’s part of the same brand.
Step 3. Compare different franchise options
It’s a good idea to evaluate more than one opportunity. Contact a range of franchisors and assess their systems and offers. Take the time to review the information, make note of questions, and follow them up with the franchisor. Even if you have a specific franchise in mind, comparing a range of options will give you a broader idea of what’s available.
Step 4. Research the market
It’s important to conduct an independent look at the viability of your proposed franchise. Look at factors such as market trends, the industry’s growth, competition, threats, and opportunities. Your ANZ Business Specialist can provide some resources to help you through the market research process.
Step 5. Meet the franchisor and other franchisees
Once you’re confident about which franchise you’d like to buy, the next step is to set up a meeting with the franchisor. There’s no substitute for face-to-face conversations to help you assess a franchisor and their organisation.
It’s also a good idea to meet with other franchisees to understand how they operate day-to-day and whether the business has met their expectations. It’ll be even better if you can meet them on-site to get a feel for how the business is run.
Step 6. Understand your franchise agreement
Review the franchise agreement carefully. It includes key provisions and principles including rights, obligations, duration, and costs. Ensure you fully understand it, and that it encompasses all the documentation and information you’ve used to make your decision.
The franchisor may be unwilling to make changes to the agreement. Think about whether you’re still happy to proceed if this happens. In the end, the final decision is yours.
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