Franchise loans Australia – Own it like a boss

Franchising is a popular business model, with over 1,300 franchise businesses in Australia alone. If you're planning to buy a franchise, there are a number of costs you should consider. There are also a number of financing options available, including secured and unsecured business loans.

What is a franchise and how much does it cost?

A franchise is where the owners (the franchisors) sell their business name, logo and model to a third party (the franchisee). The franchisee is given access to an established business model, as well as assistance and training to manage their business. In return, they pay a franchise fee to the franchisor.

Franchising is a well-established and recognised way of doing business in Australia and as of 2025 franchises employ more than 548,784 people. In terms of turnover, there are estimated annual sales of $201.2 billion.

However, it can be costly, as there are both business operational costs and the franchise fee to consider. According to Griffith University's 2016 Franchising Australia report, the average start-up cost for a new retail franchise unit was $287,500, compared to $59,750 in a non-retail franchise. This included an initial franchise fee of $31,500 in retailing, compared to $28,000 in non-retail franchises.

That said, start-up costs, inclusive of franchise fees, inventories and training range from $2,500 to upwards of $1.2 million.

Finder survey: How many Australians from different states have considered franchising a business?

How can I become a franchisee?

If you're thinking of becoming a franchisee, there are a number of steps you need to take. These include:

• Learn about franchising: Research how franchising works and assess if this business model suits your skills and commitment.
• Choose the right industry and franchise: Pick an industry that aligns with your expertise, such as retail, food, education or finance.
• Check criteria: Ensure you meet the franchisor's requirements, such as skills or a required deposit.
• Contact the franchisor:Ask detailed questions about fees, royalties, your role, workload, support, training and marketing to decide if it's the right fit.
• Do due diligence: Consult your accountant, lawyer, and advisors with franchising experience.
• Review and apply: If proceeding, fill out the application, review the disclosure documents, franchise agreement, and speak to current franchisees.
• Secure financing: If you have the money saved, you will be good to go. Otherwise, at this point you will want to apply for financing if needed and get it confirmed.
• Sign the agreement: Once finances and paperwork are ready, sign the franchise agreement to begin your journey.

What are the pros and cons of starting a franchise?

Pros

• Don't have to build the brand from scratch. You'll be relying on an existing brand name and won't have to spend years building your brand.
• Advertising. In the same vein, your business will receive more advertising than it ever would if you started it yourself.
• Training. The franchisor will train you, sometimes at the start and on an ongoing basis. This training can include not merely how to make the product, but also how to manage the business side of things.
• An already established network. This includes a network of suppliers, as well as fittings and equipment. As part of this network, you're likely to get better prices than you otherwise would.
• Support. There's an existing network of support you can rely on. Franchises often have a team of people who can advise and assist you.

Cons

• Cost. Every business comes with costs, but with franchises, you will owe a percentage of your sales to the franchisor. This can eat into your profit margins.
• Risk. While you'll be plugged into an existing brand ecosystem, there's no saying how it will go. You need to do your research thoroughly to ensure you're making the right decision.
• Restrictions. You will have to run the business as the franchisor says, and there may not be much room for deviation. You may find this difficult if you're used to running things your way.
• Demands on the franchisee. You may have to meet certain requirements, such as working in the franchise for a number of months. This will depend on the franchise, but some franchises may expect it of you.
• Stress and difficulties. You may have to keep long hours, manage staff and maintain the standards expected by the franchisor. This can cause stress and make it a difficult venture.
• Lots of paperwork. There will be paperwork from the franchisor, and if you're applying for a loan, from the lender.

What are the popular franchises I can buy?

There are a number of different types of franchises you can buy, across a range of industries. These include:

• Fast food franchises like McDonald's and Domino's
• Juice bars and bubble tea franchises like Boost and Gong Cha
• Health and fitness franchises like F45 Training
• Home service and repair franchises like Jims Group

How can I finance a franchise?

Depending on what you need the funds for, there are a number of business loans you can apply for. These include:

Secured business loan

This type of loan requires an asset as collateral. Residential or commercial property can be used. You could also secure it against your franchise and get a loan term limited to the length of the franchise agreement. Longer loan terms may be available if secured by residential property.

Unsecured business loan

This loan does not require an asset as security. Borrowing amounts are lower, and loan terms can be limited to the length of the franchise agreement, around 5 to 10 years.

Low-doc business loan

This loan is designed for borrowers who can't provide the usual proof of income. Lower documentation is required for this loan.

Business line of credit

With a line of credit you can borrow funds on an ongoing basis, as opposed to a single lump sum payment. This type of loan is usually used to provide working capital for your business. It can be either secured or unsecured.

Finance from franchisor

Some franchisors offer their own finance arrangements to potential franchisees.

What should I consider before applying for a franchise loan?

• The amount you need to borrow:The amount you need depends on the franchise and industry. Some franchisors require you to use personal equity, meaning you can't fund the entire purchase with a loan.
• Additional finances: Loans may cover initial franchise fees but not everything else, like equipment, furniture or premises. Plan how to cover these to prevent cash flow issues later.
• Your financial situation and borrowing power: Lenders will assess your assets, liabilities, credit history and whether you can offer property as security. This determines your borrowing power.
• Other franchising options:Some franchisors provide financing, repaid through royalties or profits. Compare vendor financing costs with traditional loans to ensure you're choosing the most cost-effective option.
• Bank accreditation. Franchises with bank accreditation may allow you to borrow up to 70% of the purchase price, as lenders view these businesses as lower risk.
• Advice from your accountant. Your accountant is the best person to advise you on whether you should proceed and how much you can afford to borrow. They can also help you figure out the best way to fund your franchise.

How can I compare franchise loans?

Here's what you need to keep in mind when you're comparing loans and lenders.

• Interest, fees and comparison rates. Look beyond interest rates to the comparison rate, which includes fees and shows the true loan cost. Low-interest loans with high fees can end up more expensive overall.
• Loan term. The repayment term affects your costs. Short terms mean higher repayments but less interest, while longer terms reduce repayments but increase total interest and fees. Use a loan calculator to compare options. You can use a business loan calculator to get an idea of what your repayments will be with different loan terms.
• Loan amount. Lenders have set minimum and maximum lending amounts. Make sure the amount you need is on offer from the lender.
• Loan features. If there are specific loan features you would like to have, make sure to check which loans offer these features. This can include early repayments, early exit without penalty and redraw facilities.
• Turnaround time. Check how long the lender takes to approve the loan and transfer the funds to you. If you need your funds within a certain time, make sure the lender is able to accommodate this.
• Eligibility. This may seem obvious, but you should only apply to a lender if you meet all their criteria. This includes your finances and credit history.

How can I improve my chances of getting a franchise loan?

It may seem daunting, but there are a number of things you can do to improve your chances of approval. These include:

• A solid business plan. Work on a comprehensive business plan before applying for finance. You'll have to provide a realistic and detailed plan for your business. Include market analysis, financial projections and how you will make a profit. This can help strengthen your case.
• Relevant experience. Do you have prior experience running a franchise or working in the same industry as the franchise you want to buy? Update your resume to highlight your relevant business experience. Provide written references from employers or employees. Having relevant experience reduces the lender's risk of lending, making them more open to your application.
• Collateral. Offering collateral makes lending less risky and your application more attractive. Lenders are more likely to lend, and at lower interest rates. With collateral, your borrowing power increases.
• Investing your own money. Investing your own money in the business shows the lender that you're serious about the franchise and will do what it takes to make it succeed. This can increase the lender's confidence in you.

What will I need to apply for a franchise loan?

Before approaching a bank, it's essential that you're organised and have a clear plan. For help putting together a business loan application, contact a broker or ask your accountant for advice. To apply for a franchise loan, you may need to provide:

• Personal financials. This can include your personal tax returns and business financial records. You will also have to provide details on your other debts.
• Business plan. Have your accountant prepare a business plan including a profit forecast for your proposed franchise business.
• Relevant business experience. Highlight your relevant business experience to demonstrate that you know what you're doing and can run the ship.
• Loan security. Substantial savings with no attached debt or sufficient equity in a residential property will put you in an excellent position to be approved for finance.
• Financials on existing franchise. If you wish to purchase an existing franchise, provide fully audited financial documents for the past 2 years, including profit and loss statements.

How can I apply for a franchise loan?

🤔 Work out what type of loan you can apply for, how much you need to borrow and what you can afford.

🔎 Start comparing lenders and loan products. Don't forget to compare interest rates, fees and eligibility criteria. You can use the comparison table on this page.

✅ Select a lender. Click "Go to site" to be directed to the lender's page, or "More info" if you want to read about the lender.

🖨️ Organise and prepare the required documentation. This will make the application process easier.

📱 Apply. Most lenders have their applications online.

Frequently asked questions

• How much deposit do I need to get a franchise loan in Australia?

  Most banks will lend between 50% to 60% of the total franchise setup cost. This means you will typically need to contribute the remaining 40% to 50% as a cash deposit. Some lenders may allow the use of equity in your home to cover this deposit.

• Do Australian banks prefer certain franchise brands?

  Yes, absolutely. Banks categorise franchises into tiers. Tier 1 franchises (like McDonald's or Domino's) are seen as lower risk and can access more favourable terms and higher lending percentages. Newer or less-established franchises may be harder to fund.

• What security is required for a franchise loan?

  The loan is primarily secured by the business assets of the franchise itself. However, virtually all lenders will also require a personal guarantee from the director(s), and they may require property security for weaker applications or to fund the deposit.

• Do I need industry experience to get approved?

  Yes, both the franchisor and the bank will want to see that you have relevant business management or industry experience. A lack of experience is a common reason for a franchise loan application to be declined.

• What key documents must I provide?

  You will need to provide a copy of the signed Franchise Agreement, a detailed business plan with financial projections, your personal financial statements and evidence of your deposit funds.

Written by

Tim Falk

Writer

Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 20-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio