SPOTLIGHT: FOOD
How to buy a
FOOD T franchise RESEARCH
Hungry to invest in a food franchise? Before you bite into this sector, use our easy guide to check out what you need to do to buy yourself a business.
o get it right when you sign up to a franchise you’ll need to take certain preparatory steps. And if you’re choosing a food service business model, there are some industry-specific elements to consider. But don’t worry, we’ve made the job easy.
“I see a lot of people who buy a particular franchise because they love the product or service being delivered – they are a customer and think ‘this food is fantastic’ (assuming it’s a food business) and they imagine they would love to be selling this to customers themselves,” writes Corinne Attard. “Now, having a great in-demand product is not the only thing to think about. Many restaurants and fast-food places (‘quick service restaurants’ being the industry term) sell delicious food so this is just the first and most obvious requirement. “Here are my key steps to buying a food franchise.”
counting the customers and estimating their average spend – you can then get a realistic idea of sales. You may need to repeat this over different days.
STEP 1. RESEARCH, RESEARCH, RESEARCH Due diligence is spoken about a lot but what does it involve? You need as much information as possible about the way the business operates and what is going to be involved. The franchisor is one source of information but you need to speak to current and previous franchisees to assess their experience of running this business and obtain the answers you need. For a food business some specific suggestions are:
Check the supply chain Find out from the franchisor which suppliers you can use for the various ingredients (e.g. soft drinks, coffee, milk, cleaning products) and packaging you’ll need in the business. If you can, find out what prices are charged to franchisees. How does this compare to other suppliers? Make some phone calls to find out. It is a fact of life in franchising that the supplier chosen by the franchisor may not be the cheapest, so ask why if this is the case. You may be told it is because the franchisor wants to be assured of consistency across the system so a national supplier is preferred; or it could be because the supplier is a related entity to the franchisor, or that there is a rebate or other incentive being paid to the franchisor or into marketing. These are very
Count the customers Try to do a transaction count of the business or one very similar in the network. This means sitting in the business over the day and
Survey the customers Ask the customers about the service they receive, the product and how often they buy from the business. Collect data Get some hard data on specific items such as your occupancy cost (rent and outgoings as a percentage of sales) and your cost of goods sold (COGS). These ratios are percentages you can then use to compare across systems and specific businesses.
LEGAL Corinne Attard, Holman Webb Lawyers
MEET THE
EXPERTS
These franchise experts know what it takes to be well prepared to invest in a business where food is front and centre. FEB/APR 2020 | 108 | WWW.FRANCHISEBUSINESS.COM.AU
Corinne is a commercial lawyer with more than 25 years franchising and retail industry experience including as in-house counsel with oversight of more than 350 franchised food outlets. Named as one of the top franchise and business lawyers in Australia annually since 2014 in International Who’s Who of Business Lawyers, Corinne has also been included in Best Lawyers 2019 and 2020.
