Buying, starting or franchising a business

A step-by-step guide to buying a franchise

Owning your own franchise business is a dream for many Kiwis – but actually ‘taking the plunge’ can be daunting. To get started use these six steps to buy a franchise business, and help turn your dream into reality.

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Step 1. Identify what sort of franchise you want

It might seem simple, but the fact is, it’s a lot harder to succeed in business if you don’t care about what you’re selling. Think about the types of industries that appeal to you, then find out what’s available to buy. 

A business broker can help you with this process. There are also a range of online sources such as Franchise New Zealand, and online marketplaces like NZ Biz Buy Sell and Trade Me.

Step 2. Establish how much you can spend

Franchises vary in their initial entry costs and their ongoing costs. Work out what sort of franchise you can afford and whether you’ll need finance. 

This is a good time to engage with your accountant and an ANZ Business Specialist. They’ll help you consider some of the typical costs, such as:

  • Initial fee – the franchise ‘right’ and initial training
  • Set-up costs – the establishment costs of the business, such as shop fit-out, stock, signage, and equipment
  • Royalties or franchise fees – typically calculated as a percentage of the franchisee’s turnover
  • Marketing or advertising fees
  • Other ongoing fees, such as training or insurance.

Remember, costs can vary widely between franchise systems depending on factors such as location, size, and rent. What you know about one franchise might not be useful when looking at another, even if it’s part of the same brand.

Step 3. Compare different franchise options

It’s a good idea to evaluate more than one opportunity. Contact a range of franchisors and assess their systems and offers. Take the time to review the information, make note of questions, and follow them up with the franchisor. Even if you have a specific franchise in mind, comparing a range of options will give you a broader idea of what’s available.

Step 4. Research the market

It’s important to conduct an independent look at the viability of your proposed franchise. Look at factors such as market trends, the industry’s growth, competition, threats, and opportunities. Your ANZ Business Specialist can provide some resources to help you through the market research process.

Step 5. Meet the franchisor and other franchisees

Once you’re confident about which franchise you’d like to buy, the next step is to set up a meeting with the franchisor. There’s no substitute for face-to-face conversations to help you assess a franchisor and their organisation. 

It’s also a good idea to meet with other franchisees to understand how they operate day-to-day and whether the business has met their expectations. It’ll be even better if you can meet them on-site to get a feel for how the business is run.

Step 6. Understand your franchise agreement

Review the franchise agreement carefully. It includes key provisions and principles including rights, obligations, duration, and costs. Ensure you fully understand it, and that it encompasses all the documentation and information you’ve used to make your decision.

The franchisor may be unwilling to make changes to the agreement. Think about whether you’re still happy to proceed if this happens. In the end, the final decision is yours.

Tips for buying or selling a business

Hear from Sam Cherry of TABAK Business Sales and Anthony Bowe, ANZ Relationship Manager, on how to prepare your business for sale.

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Important information

We’ve provided this material as a complimentary service. It is prepared based on information and sources ANZ believes to be reliable. ANZ cannot warrant its accuracy, completeness or suitability for your intended use. The content is information only, is subject to change, and isn’t a substitute for commercial judgement or professional advice, which you should seek before relying on it. To the extent the law allows, ANZ doesn’t accept any responsibility or liability for any direct or indirect loss or damage arising from any act or omissions by any person relying on this material.

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