Thinking about buying a franchise?

When people buy a franchise, they aren’t just buying a business, they are buying a support system, a brand, and systems and processes that are often already in practice in New Zealand with proven success.

With more than 590 franchise brands across over 30,000 business units, franchising is very popular in New Zealand, with over $58billion estimated turnover in the franchise industry.

As with buying any business, it is important to do your due diligence and get advice from trusted advisors before entering an agreement – this includes a franchise accountant because of their specific franchising expertise. There are some nuances in franchising that makes partnering with advisors who are experienced in the industry more efficient as they understand the jargon and can tell you exactly what things mean, providing you with peace of mind.

Existing business or green-fields?

When purchasing a franchise, you may be looking at an existing business that is already up and running with the current owner looking to sell, or you could be looking at a green-fields business, being a new franchise opportunity. Each of these options creates different challenges and opportunities such as whether there is an existing client base, employees and premises, or the need to find premises and complete a fit-out prior to operations commencing. It is also important to understand any territory restrictions and competition in the area.

Choosing a franchise brand

When considering what franchise system you want to buy into, it is important to understand who you are going into business with (the franchisor) and how they operate. Discuss what training and support will be provided and ask to speak to existing franchisees to understand what they do and don’t like about the franchise system. Understand any ongoing fees charged by the franchisor and evaluate any pros and cons of pricing and supply policies.

Structuring your franchise business

Running one or more franchise units presents unique structuring challenges that need to be considered, taking into account your personal situation, financing requirements, goals and succession planning for the future. Our franchise experienced Nexia advisors have a range of skills that, when used in conjunction with their understanding of the franchise industry, provides a specific and relevant skillset for our franchise clients.

Franchise financing

Up-front costs for franchises will often include a franchise fee, training costs and potentially a fit out depending on the business you are buying into. Understanding the costs involved in buying a franchise is important when looking at your financing requirements and some may be clearly identified in a franchise agreement. If bank lending is required, it is likely financial forecasts will be required to ensure repayment terms can be met.

Nexia has a team of professionals who are experienced franchise accountants, with a large number of franchisee and franchisor clients in varying industries. As members of the Franchise Association of New Zealand (FANZ), we also work alongside other franchise industry experienced advisors to ensure the best outcomes for our clients. If you are looking to buy into a franchise, or if you are considering franchising an existing business, get in touch with our team for specialist advice.