Buying a Franchise: Financial Matters
HOW TO FIND A GOOD OPPORTUNITY Daniel Cloete from Westpac offers some important questions for business buyers
espite headwinds like inflation, interest rate rises, supply problems and a general shortage of staff, economists are still seeing strong growth for the New Zealand economy through 2023. Although you can argue that the shortage of staff and some other factors may be linked to the bounce-back effect after lockdowns, the overall picture suggests that there are still good new business opportunities for the wise buyer. In my last article, I looked at the continuing availability of funding, the need to manage working capital, and why buying a franchise can improve the options for business buyers. I also suggested some questions that buyers might like to ask about the industry that they were looking at (read that article at www.franchise.co.nz/articles/3476).
Daniel Cloete franchise, you can get some real, up-to-date information from several sources. These include: • Speaking directly to the franchisor team – not just the franchise salesperson but, as you get serious, some of the specialists in areas such as marketing and property; • Talking to other franchisees in the group; • Talking to other franchises in the same industry; • Consulting specialist accountants, lawyers and bankers who know the franchise and its competitors in the industry, and who can help you through the due diligence process.
So what do you do next? After exploring different industries and trends, and considering the franchise opportunities within your preferred sector, you need to get into the details.
Don’t be hesitant – asking the hard questions when looking at a franchise dramatically increases your chances of buying a profitable business that is also right for you.
This is an area where franchising is a great model for someone wanting to get into a business for themselves. If you are starting your own independent business, all you have to go on is your own research and your feel for the market; if you are buying an existing business, you are dependent on figures supplied by the vendor and your belief that you can do at least as well as the previous owner. But when you buy a
So what should you ask franchisees? Franchisees normally love to talk about their businesses, and you can learn a great deal from them about what it’s actually like running the business, typical cost structures and the support provided. They may also be prepared to talk about profitability, margins, and other things
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Year 31 Issue 02