Top Franchises in Your Price Range
The franchise industry offers first-time business buyers a wide variety of options. Not only are there thousands of franchise categories and companies to choose from, but there are a variety of franchise opportunities in different price ranges. So, where do you start?
Why buy a franchise?
Wanting to trade under an established brand is usually the motivation for franchisees purchasing an existing franchise. However, franchising, similar to starting a business from scratch, can be a costly business venture, and before jumping straight in, it is essential to consider all of the costs and financial obligations involved.
Franchisees are advised to carefully examine all franchise documents to determine all the costs involved. In particular, franchisees should carefully read and understand the disclosure document because, as required by the Franchising Code of Conduct, franchisors are required to disclose all actual or potential associated costs of the franchise business, including the initial franchise fees and expenses through to the ongoing fees or royalties. The document should detail costs, including upfront documentation fees and all day-to-day operational expenses. Potential franchisees should seek specialist advice from the very start of their franchising journey to ensure they have a full understanding of these obligations.
Is the price, right?
One of the critical factors in deciding on a franchise business is whether or not you have the capital to cover an initial fee and any ongoing costs.
To determine what you can afford to invest in a new franchise business, you need to have a good understanding of your current finances. You can start figuring your net worth by compiling a balance sheet that lists all assets and liabilities and also seek specialist advice.
Most franchise businesses require a new franchisee to pay an initial fee to become a franchisee. This fee can be as low as $5000 to $15,000 or as $1,000,000 or more. According to the Franchising Australia 2016 report by Griffith University, the average upfront fee for a retail franchise is $31,500 and $28,000 for non-retail franchises
The initial franchise fee varies from business to business and is paid by the franchisee when the franchise is granted. The initial franchise fee will cover things like the cost of training, recruiting, territory planning and analysis, site selection, specialist equipment, stationery and the launch.
This fee comes on top of the capital required to fund shop fit-outs, plant and equipment, inventory and lease commitments - these are not paid for by the franchisor. The report notes that the average start-up cost for a new retail franchise is approximately $287,500 compared with $59,750 for a non-retail franchise.
Are there any other ongoing fees?
Franchisees are usually also required to pay an ongoing franchise fee or royalty. This fee is typically expressed as a percentage of the gross revenue of the franchised business but can also be a fixed periodic amount either per week or per month, regardless of income. These fees can vary depending on the franchise.
Some of the most typical costs and fees paid to the franchisor (or to direct partners or suppliers of the franchisor) can also include:
- Marketing Fees. Franchises often require contribution and participation in a traditional advertising or marketing fund. This fund is frequently a national program, but it can also have a regional or local market focus.
- Required Purchases of Products or Services. Some franchisors also require that a franchisee purchase certain required products or services either from the franchisor or from affiliated partners or suppliers of the franchise company.
What can you afford?
Some franchise experts believe you should not invest more than 15 per cent of your capital, but this percentage may vary. Seeking the consult of a financial advisor is wise because they can help you determine how much of your own money, you can afford to invest based on your specific financial situation.
Unless you are interested in a low-cost franchise, you will likely need to borrow the majority of the funds to purchase your business. In general, lenders require you to provide 20–25 per cent of the total investment. For example, if you have $50,000 to invest, you will want to research franchise opportunities in the $200,000 range. Before approaching any lender, make sure you are not behind in any bill payments, correct any mistakes on your credit report, and be prepared to explain any blemishes.
Let’s take a look at some top franchises
SuperGreen Solutions have been globally trusted energy efficient products specialist for over 20 years’ with over 81 locations in 9 countries. SuperGreen have recently released a mobile version of the bricks and mortar model in the form of SuperGreen ‘Direct’. The initial franchise fee is $48,000 and an $85,000 minimum investment which includes franchise fee, sign written, equipped van plus the vehicle lease.
Boost Juice is one of the world’s most famous and loved smoothie and juice brands. Boost Juice offers a healthy alternative to fast food. Founded by Australian adventurer and entrepreneur, Janine Allis, the first Boost Juice store opened in Adelaide in 2000 and is now an international success story with over 500 stores in operation. The initial franchise fee is on the lower scale at $2200 and a minimum investment from $220,000-$350,000.
The Lott is one of Australia’s largest franchise networks with almost 4000 franchisees operating across all of Australia, except WA. Their franchise system complements a range of businesses including convenience stores, convenience supermarkets, convenience fuel outlets, pharmacies, tobacconists, newsagencies and hotels and clubs (SA). The initial franchise fee is between $5500 - $27,000 and the minimum investment between $34,000 to $56,000.
With more than 1,350 locations across Australia, Subway is the largest restaurant chain and serves nutritious and delicious subs, salads and wraps along with its iconic cookie rang. Subway customers can choose from 37 million combinations of premium-quality meats, cheeses, fresh vegetables, cookies & bread baked daily. The initial franchise fee comes in under the average at $15,000, and the minimum investment required is dependent on the site location.
Snap Print & Design is a multi-award winning Australian franchise operating in the growing digital-print market space. Their focus is on delivering innovative and high-quality business print and design solutions for their customers. Boasting a 120-year history in the print industry and with 40 years in franchising, Snap is 100 per cent Australian owned and operated. The initial franchise fee is $35,000 and the minimum investment at a lower than average cost of $50,000.
Snap-on Tools Australia & New Zealand is a mobile franchise operation, putting high-quality tools and equipment into the hands of mechanics, engineers, and other professional tool users across the country. Their initial franchise fee is $50,000, and potential franchisees can take advantage of an exclusive finance package to assist new franchisees.
Established in 1986, Bathroom Werx specialises in quick and affordable bathroom makeovers saving their clients thousands of dollars on bathroom renovations. The minimum investment required for the Bathroom Werx franchise is $45,000 plus vehicle investment.
Bedshed is an accredited franchise business model backed by over 35 years of successful operation, Bedshed provides support, specialised advice, training and a proven structure which takes a lot of the risk out of running your own business. The initial franchise fee is $75,000 and the minimum investment between $500,000-$750,000.
Bakers Delight are an iconic Australian brand. The brand has been baking bread since 1980 and currently have over 600 bakeries across Australia, Canada and New Zealand. Bakers Delight offer franchisees the option of opening a brand new Bakers Delight or an established bakery and prices vary accordingly from $50,000 up to $1,000,000.
InXpress is a global express logistics business with over 380 franchisees, located in 14 countries, providing consultative services and innovative software for small and medium enterprises. Founded in 1999, InXpress has a long history in managing successful businesses, with the know-how to train and support franchisees in running a sales and business management franchise. The initial fee is $64,950.
Polished Diamonds Australia is an internationally recognised, award-winning Jewellery retailer and are looking for franchisees with strong sales and marketing experience and the ability to think laterally. Manufacture of the product is supplied so excellent selling skills are essential. The initial fee for a Polished Diamonds franchise is $50,000, and the minimum investment required is $100,000.
IWG plc offers an opportunity to diversify away from traditional franchise markets, and benefit from strong cash returns and attractive returns on investment with the global operator of leading workspace providers. With brands to match every requirements and style, like Regus and Spaces. The initial franchise fee is $50,000, and you will need an investment of $1,000,000.
To help to narrow down the full range of franchise systems available in Australia and New Zealand readers can head to the Franchise Listing Directory located in the back of the magazine and on our website. We have also just released our Annual Franchise Directory which includes the most comprehensive list of over 2000 franchise systems and franchise service providers by category across Australia and New Zealand, as well as, expert articles, global franchise associations, useful information and helpful organisations. Head to our website for more details.