Buying a Franchise
Increase your chances of success Daniel Cloete of Westpac looks at some ways that franchise buyers and franchisees can minimise risks
A
fter several rough years, economically speaking, New Zealanders are looking at possibilities again. Some may be following a dream or looking to move to a new area, while others are looking for opportunities for self-employment. Many people are considering diversifying away from property to reduce cash flow risks, or looking to build income and equity. Buying a franchise can help you achieve all of these things, but you do need to be careful as your life savings, house and financial future are all potentially at risk. The secret is to identify possible issues in advance and develop an action plan to reduce possible problems or turn them into successes. Here are some tips that may help.
• How will you keep on top of your business? Good franchise information systems will help you measure key aspects of your business, including sales numbers, gross profit margin, controllable costs (labour costs, wastage etc.), taxes and profit. Other aspects may include tracking customer numbers and average customer spend per transaction. Staying on top of these figures helps you spot issues early.
Daniel Cloete
• Ensure you have access to enough working capital – the money you will need to run the business, pay the staff, pay the rent, etc. You also need to ensure you hold enough working capital to cover any start-up losses/costs before the business starts to make money, and a little in reserve for unforeseen circumstances.
Stay on top
Be prepared
• Compare your financial projections to actual results at least monthly. Look at any variances (negative and positive) and develop a specific and measurable action plan to handle them. For example, if your labour costs are higher than expected, then go back to your rosters and reduce this cost. Make the hard decisions early before your business is put at risk.
• Before buying the business, research the opportunity fully. A good rule of thumb is to spend at least one hour of investigation for each $1000 invested. This includes researching the business, its location, competition, and the industry; speaking to other franchisees; and consulting franchise-experienced accountants, lawyers and the local council. In this way, you can learn from the experience and mistakes of others.
• Limit the money you draw from the business. Don’t buy a new car or upgrade your house before you are certain the business can afford it. Businesses need money to fund expansion; spending it on other things will cause cash flow problems later.
• Keep your bank informed. Meet with your bank regularly, particularly if you have a problem. They want you to succeed, so the earlier you seek advice, the better.
are you Interested in becoming a local Supermarket owner? Wholesale Distributors Limited (WDL) is the franchisor for the FreshChoice group of supermarkets. WDL have supermarkets nationwide, but are always looking for new and exciting opportunities to expand throughout New Zealand. WDL is a division of Woolworths New Zealand (WWNZ). WWNZ in turn is 100% owned by Woolworths Limited which is one of Australasia’s largest retailers. All our stores are locally owned and operated. Our owners and store teams care about building strong connections to the communities they serve, and are constantly striving to inspire and engage customers. We are proud of the passionate people that represent FreshChoice, and they in turn are proud to be advocates of it. If this sounds like an opportunity your interested in, please get in touch with Operations Manager David Callaghan from the contact details below: david.callaghan@woolworthsnz.co.nz 027 494 8361 www.freshchoice.co.nz/about/franchise-opportunities/
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Franchise New Zealand
Summer 2024
Year 32 Issue 04
