Starting a franchise in the ACT
If you're thinking of starting a franchise in the ACT, here's everything you need to know.
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The ACT may be tiny in terms of both physical size and population compared to geographical giants like Western Australia and highly densely populated regions like New South Wales, but it offers a fantastic lifestyle along with this nation's capital city. Canberra is a delightful mix of city living within a relaxed country setting, and has an excellent school system, top-class healthcare and a well-established public transport system.
The government in the ACT introduced an $11.8 million small-business funding initiative in 2015, which has helped to boost the territory's business sector. The territory's budget for that year also included a further $1.4 million aimed at attracting new investment and residents in Canberra itself.
What type of franchises could be successful in the ACT?
The ACT boasts a hub of activity within a very small geographical location. As such, mobile franchises have proven to be a popular franchise choice, allowing franchisees to bring their services directly to their customers. In addition, retail franchises within Canberra itself remain a popular choice.
Laws relating to business and franchising in the Australian Capital Territory
In the ACT, all franchises and other businesses must comply with federal and territory laws. The relevant federal legislation is the Competition and Consumer Act 2010 (CCA), which is administered by the Australian Competition and Consumer Commission (ACCC). The CCA covers the majority of aspects of the business marketplace.
Of specific relevance to franchisees, the Franchising Code of Conduct forms part of the CCA. In the ACT, the ACCC is located at 23 Marcus Clarke Street, Canberra.
In the ACT, the relevant territory legislation is the Fair Trading Act 1992.
Costs of starting a franchise
Example initial costs of franchises currently available in the Australian Capital Territory are as follows:
- Drummond Golf, a golf retail franchise, requires an initial investment from $400,000.
- Anytime Fitness is a 24-hour gym and fitness club franchise and requires an initial investment from $300,000.
- Mrs. Fields is a well-known coffee and cookies franchise with a relatively low start-up investment cost of $180,000.
Financing options for starting a franchise in the ACT
How can I finance the purchase of a franchise in ACT?
Ready to start down the road of purchasing a franchise in the ACT? It's time to compare your options for finance.
Business loan. The terms of the business loan will vary from lender to lender, but business loans tend to have loan terms of between 3 months and 5 years for smaller, alternative lenders and up to 30 years for banks. Alternative lenders will offer funds with no security required while banks tend to require residential or commercial security.
Franchise loan. With a franchise loan, you are borrowing against the value of the franchise rather than against residential property. As such, the loan term is directly linked to the initial term of the franchise agreement. Lenders will typically lend between 50 and 70% of the purchase price of the franchise and may offer loan terms that are more flexible than those for a secured business loan. On the other hand, because a franchise loan does not involve residential property being put up as security, the loan will typically attract higher fees and higher interest rates than a business loan.
Franchisor finance. Recognising that some people run into difficulty obtaining franchise finance, some franchisors have created their own schemes whereby the franchise can be purchased directly through the franchisor itself. For example:
- Snooze, which has been in the bedroom retailing business for more than 40 years, is accredited by both ANZ and the NAB, and offers to assist potential franchisees with finance through their bank partnerships, or alternatively, with vendor finance.
- Total Tools is a retail chain that services tradespeople. With accredited associations with a variety of Australian banks, the company tries to help potential franchisees to obtain finance.
Frequently asked questions
Are there any franchises that don't require physical office space?
Yes. Some franchises can be run successfully from home, such as a financial services franchise. Other franchises are mobile and take their products and services directly to their customers, such as coffee vans, sports and dance classes, or mobile entertainment such as for children's parties.
How involved will the franchisor be in the ongoing running of the business?
This will depend to a large extent on the type of franchise and the individual management style of the franchisor. However, it is important to be aware that the franchisor has the power to make demands on its franchisees and to control many aspects of the individual franchised businesses. For example, the franchisor could require your franchise to stay open for certain hours or on certain days of the year or could even mandate that you undertake ongoing training and development or participate in testing or exams.
How can I find out if a business I'm interested in can be franchised?
The best way to find out is simply to ask. Contact the head office of the business you're interested in or speak to the manager at your local store. Alternatively, search on the Franchise Council of Australia's website to see if the business you're interested in is a member.
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