expert advice: Stewart Germann | Franchising Lawyer | Auckland, New Zealand
ENSURE YOUR FRANCHISE PURCHASE IS AFFORDABLE Franchising as a method of marketing goods and services is exciting and there are many business opportunities available. It is essential for any prospective franchisee to look carefully at a business opportunity which involves carrying out due diligence. Purchasing a new Franchise system and being one of the first six franchisees is often exciting, however, great care must be taken. Trending franchises which may be appealing are often is in the fitness industry and food. For fitness, the choice is extensive – consider Anytime Fitness, Snap Fitness, F45, 9-Round. Another area is laser skin clinics and a robust system is Australian Skin Clinic. Once a franchisee has identified a particular business to buy then he or she should consult with an accountant and an experienced franchising lawyer. The choice of businesses available is huge – for
example, you could purchase a full format business franchise system like Coffee Club or Domino’s Pizza, or you could purchase a franchise service like Jim’s Mowing or VIP Home Services. Whatever system you want to purchase, you must ensure that you can afford the purchase price which would include goodwill, plant fittings and fixtures, and the stock for an existing business. If you elect to purchase a greenfields opportunity then you will have to pay the upfront franchise fee to the franchisor and those fees differ considerably from $5,000 or $10,000 for a service franchise to $50,000 for a full business format franchise.
Process The usual process starts with executing a confidentiality agreement. If you are buying an existing business through a business broker you will be provided with an information memorandum. Whatever you purchase, make sure you can afford the total purchase price including having a working capital provision to cover upfront lease rental payments, legal and accounting fees and money in the bank to get you through the first three months.
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