Starting a franchise in NSW
Everything you need to know about obtaining franchise finance in New South Wales.
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The most populated state in Australia, New South Wales has the highest amount of franchising activity in Australia, with approximately 34% of all franchises being located within NSW. Approximately 62 per cent of the population of New South Wales live in Sydney, with other highly populated areas including Coffs Harbour, Wollongong and Newcastle. With an impressive record of 26 years of uninterrupted economic growth, New South Wales credits high levels of investment and equally high government support for its ongoing economic success.
Sydney is renowned for its strong financial and professional services sector, as well as its broadcasting, publishing, and communications technology industries. Further afield, Wollongong is known for agriculture, aquaculture, engineering and manufacturing, while Newcastle excels at coal mining and winemaking.
The New South Wales government has been focused on infrastructure spending in recent years, which has further boosted New South Wales's economic growth. In addition, the state government has been focused on job creation and incentivising small businesses for hiring new workers.
What type of franchises could be successful in New South Wales?
In contrast to Sydney's bustling city centre, regional areas of New South Wales are taking longer to catch up and provide services that have been readily available in Sydney for years. Franchise opportunities exist in a variety of industries in Sydney and throughout other areas of New South Wales.
People looking to purchase a franchise in New South Wales could look towards extending a successful city franchise into a regional area of NSW.
Franchise financing options to compare in NSW
Laws relating to business and franchising in NSW
All businesses in New South Wales are subject to both federal and state laws. The Competition and Consumer Act 2010 (CCA) is federal legislation administered by the Australian Competition and Consumer Commission (ACCC). The CCA ensures that business trading is fair for customers and business owners alike.
The Franchising Code of Conduct is prescribed under the CCA and relates specifically to franchise businesses. In New South Wales, the ACCC is located at Level 7, Angel Place, 123 Pitt Street, Sydney. The relevant state legislation in New South Wales is the Fair Trading Act 1987.
Costs of starting a franchise
Example initial costs of franchises currently available in New South Wales are as follows:
- The Cheesecake Shop, a food retail shop selling handcrafted and customise cakes with quick turnaround, requires an initial investment from $400,000.
- Kwik Kopy is a printing and design franchise with an initial investment from $210,000 for a new franchise.
- GO SUSHI is an Australian owned sushi franchise that claims to give a western twist to eastern cuisine. Initial investments of at least $180,000 are required to purchase a new franchise.
How can I finance the purchase of a franchise in New South Wales?
Once you've decided that you are ready to start a franchise in New South Wales, the next step is to compare your franchise finance options.
Secured business loan.
This will vary depending on your chosen franchise and the individual lender. All secured business loans require a residential or commercial property to be put up as security for the loan. Depending on the strength of the property, a lender will offer anywhere between 50 and 100% of the value of the loan. Some lenders will also require additional security like a director's guarantee or a fixed and floating charge over commercial property.
Unsecured business loan.
A unsecured business loan is type of loan does not require you to attach a residential or commercial property as security. You can generally borrow up to $250,000 although some lenders will lend up to $500,000. Terms vary, but you may be able to choose terms of between three months and five years. Your eligibility will depend on how long your business has been operating and the amount of annual turnover you can demonstrate.
A franchise loan is similar to a business loan, with the main difference being the loan term. The loan term of a franchise loan is linked to the length of the franchise agreement and is generally capped at 10 years. Franchise loans are generally only available for reputable, accredited franchises. However, there is no pre-set lending criteria and an application for a franchise loan will be looked at on a case-by-case basis by each lender. As such, the amount of the loan will vary, with some lenders only lending up to 50% of the amount required. Franchise loans can involve a smaller deposit or lower amount of equity. Note that franchise loans will not include an amount for working capital.
Some franchisors run their own schemes whereby franchisees can finance the purchase of a new franchise directly through the franchisor. For example:
- Bakers Delight offers a Kick Start franchise program, whereby trainees make a financial commitment at the outset and then work full-time within a franchise for 6 to 12 months. At the end of the training, the initial commitment goes towards the purchase of the bakery.
- Snap-On Tools offers loans through Snap On finance for potential franchisees, provided they can make a $50,000 deposit towards the cost of their franchise fee, stock, training and working capital.
Frequently asked questions
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