Thinking about buying a franchise business in Australia? It’s a big move. Whether you want the comfort of a proven business model or you’re excited to own a brand with a strong reputation, you want to make sure your investment pays off. Before you buy a franchise, it pays to look past the glossy marketing. Let’s break down what you should check to build your confidence and make sure you’re investing in a profitable franchise.
Start with the Financials
If you want to buy a franchise, you need to see the actual numbers. Ask the franchisor or seller for at least three years of financial reports. Look at balance sheets, profit and loss statements, tax returns, and forecasts for sales and profits. Always ask how these forecasts are put together.
Go beyond what the sales pitch says. Get data from similar franchise locations. Find out how those businesses are performing, especially if they’re in a comparable area. Past results aren’t a guarantee, but they are still your best clue.
Keep an eye on these figures:
- Revenue
- Gross profit
- EBITDA (earnings before interest, tax, depreciation and amortisation)
- Net profit after tax (NPAT)
- Actual cash the previous owner took out of the business
It’s an old saying but still true: revenue is vanity, profit is sanity, and cash is king. If you’re buying a franchise business in Australia, you need to know how much cash will hit your bank account after wages, rent, supplier costs, tax, and loan repayments.
Don’t Overlook Franchise Fees
If you want to buy a franchise in Australia, get clear on what you’ll pay today and down the track. Ask about:
- Upfront franchise fees
- Royalties or ongoing management fees
- Marketing and advertising charges
- Costs for training, equipment, fit-outs, or promotional materials
- Any exit or transfer fees if you sell the business later
A clear fee structure helps you plan and avoid nasty surprises when you’re buying a franchise business.
Funding and Franchise Debt
Most people buying a franchise use some level of debt to get rolling. Be smart about what you borrow. Make sure you understand your projected cash flow and how repayments will affect you.
Ask yourself:
- Can I manage repayments if my income is lower than expected?
- What if my costs go up?
- Will lenders ask for personal guarantees or security over my assets?
- How will my debt affect my tax, my other investments, or my personal life?
Speak to an experienced advisor before you take on any debt. It’s one of the biggest steps when you buy a franchise business.
Chat to Other Franchisees
The best information comes from people running the business right now. When you’re buying a franchise, ask if you can speak to current and former franchisees. Find out how long they’ve been in business, if reality matched their expectations, and what sort of support they get from the franchisor. Ask about any challenges or surprises along the way.
Take a look at the broader industry, too. Check out how similar businesses in your area are performing and make sure the franchise’s tech and systems stack up against the competition.
Legal and Compliance Checklist
Before you buy a franchise in Australia, get all contracts reviewed by a legal expert. Ask direct questions:
- Is the franchisor involved in legal disputes?
- Will you need extra licences or permits?
- Are there leases, loans, or supply agreements that you’ll have to take on?
- What are the rules around pricing, staffing, suppliers, or selling the business down the track?
Protect yourself from headaches by getting the legals sorted from the start.
Get Your Lease Right
If you’re buying a franchise business that relies on a physical shopfront, the lease matters just as much as the brand. Know the renewal options, who owns the fit-out, what you can change, and who pays for repairs. Bring in a property expert early and avoid risks that can eat into your profit.
Hunt for Hidden Profit
Profit is never just about sales minus costs. Look for any hidden opportunities. Ask about how efficient the systems and operations really are. If there’s a lot of manual work, you might be able to introduce better tech, save money, boost customer experience, and grow profits.
Tax Tips for Franchise Buyers
Smart tax structuring can make all the difference. Every business is different. Get advice on how to set up your business, manage costs, and minimise your tax bite before you buy a franchise business in Australia.
Final Word: Get the Right Advice
It’s exciting to buy a franchise, but smart buyers do their homework. Dig into the numbers, check the details, and don’t be afraid to seek a second opinion—on the financials, the legal risks, and the nitty gritty of running the business.
BlueRock has experience guiding first-time buyers and seasoned business owners through every step in buying a franchise or growing one further. If you want straight answers in plain English, submit the form below to talk to our franchise business experts. We’ll help you take the next step with confidence.
