Finance for Buying a Business

Finance for Buying a Business or Franchise

Finance for Buying a Business

A checklist for buying a franchise.

Key financial information

  • Current financial statements, preferably going back three years: Balance sheets
  • Profit and loss statements Business tax returns
  • Projected sales and profits of the franchise, and the method used to calculate them

Fees

  • Current fees Ongoing fees
  • What do you get for them? Advertising
  • Promotional material Shop fit-out Equipment

Training

  • What are the conditions of the relationship? Are there transfer fees if you sell?
  • How are royalties determined?

Other franchisees

  • Does the disclosure agreement include a list of current and previous franchisees?
  • What do they say about the business?

Legal, compliance and contractual issues

  • Is the franchisor involved in any current or potential litigation?
  • Do you need licences or permits to operate the business?
  • Check all existing contracts such as leases and mortgages, especially on the business premises
  • Get your lawyer to check the franchise agreement. What are the restrictions on selling, staffing, pricing and supply arrangements?

Premises

  • Is a lease involved?
  • If so, check the lease. Is there a right to renew? Who owns the fit-out?
  • Are there other inclusions?

Track record

  • How long has the franchise business been established?
  • Does it comply with the mandatory Franchising Code of Conduct?
  • Obtain a credit reference on the franchisor

Where to find out more

  • Australian Competition & Consumer Commission
  • Franchise Council of Australia
  • Are their sales growing?
  • How is the industry performing?