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What to consider when buying a franchise

What to consider when buying a franchise

Q: Are there companies that help to buy franchise businesses? I’m looking for experts who can check  financial data given by franchisor companies. I especially want to know how much I will need to earn to generate a net profit?

A: There are specialist recruiting companies that help potential franchisors find a suitable match for their skills and needs. However, it should always be remembered that these companies generally work on a commission basis so have a vested interest in selling you a franchise. The more reputable ones are “franchise selection” and “franchise brokers”.

But trying to get a loan is exceedingly difficult without substantial collateral even for established franchises. In terms of experts who can check financial data given by franchisor companies, that is where your accountant is your best adviser, providing they have some experience in advising franchisees. is the link where most of the key professionals that specialise in the field (accountants, lawyers, brokers, demographers, consultants) advertise.

Also, if you visit the Franchise Council of Australia web site, there are some good tips there; including a great book I co-wrote The franchisee’s guide, which is aimed at helping a franchisee decide what is right for them and how to verify and evaluate the information.

In terms of how much you will need to earn to generate a net profit, that is an impossible question as it differs for each individual. Most accountants will work on a return on investment formula. That is, net profit should be sufficient to recover the initial investment within three years of operation. But this method doesn’t suit all franchisees, certainly not the ‘mobile man in a van’ style, where investment recovery is often possible in year one as entry costs are far lower. What you should be asking is “how much do I need to earn to improve my current financial position?” then, what am I good at and what do I enjoy doing? Being in business is not all about the money.


*Original Article by Phil Blain: