Starting a franchise in Victoria
If you're interested in starting a franchise in Victoria, here is all the information you'll need.
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With a population of more than five million people, Victoria is the second-most populated state in the country. Approximately 70% of people in Victoria live in Melbourne, which has a thriving business centre of insurance and financial services, scientific and professional services, healthcare, information media, and hospitality services.
Despite its already-thriving economy, the Victorian state government introduced several measures in its 2015 budget to assist start-ups and small-to-medium businesses to succeed, including grants, stamp duty reductions and exemptions, and other start-up initiatives.
What types of franchises could be successful in Victoria?
CommSec's State of the States economic performance report in 2018 showed that Victoria is experiencing a surge in population growth. Coupled with the state's thriving economy, successful franchises in Victoria could include those that cater to a rapidly growing population. Childcare centres, fast food, and service-based franchises could all succeed in the current economic climate in Victoria.
Franchise financing options to compare in Vic
Laws relating to business and franchising in Vic
In Victoria, business owners and franchisees alike have an obligation to ensure that they comply with all relevant federal and state laws. The Competition and Consumer Act 2010 (CCA) is federal legislation and is administered by the Australian Competition and Consumer Commission (ACCC). The CCA applies to the majority of businesses in Australia and aims to ensure business trading is fair for everyone.
Every person involved in a franchise is subject to the provisions of the Franchising Code of Conduct, which forms part of the CCA. In Victoria, the ACCC is located on Level 35, The Tower, 360 Elizabeth Street, Melbourne. The Fair Trading Act 1999 is the relevant state legislation in Victoria.
Costs of starting a franchise
Example initial costs of franchises currently available in Victoria are as follows:
- Muzz Buzz is a drive-through coffee franchise that aims to provide fast, convenient coffee service. The initial investment for a new franchise starts from $300,000.
- Ferguson Plarre Bakehouses is an Australian bakery and cafe franchise that has been operating for 115 years and requires an initial investment of $250,000 for a new franchise.
- Midas is an automotive service franchise which requires an initial investment of at least $120,000 to set up a new franchise.
How can I finance the purchase of a franchise in Vic?
Ready to start your own franchise in Victoria? First, you'll need to secure finance to purchase the franchise. Here are the options that could be available to you.
Unsecured business loan. These business loans have become more common recently, with smaller alternative lenders offering loans that do not require residential security. Typically, with a unsecured business loan you'll receive terms of up to two years and amounts of up to $500,000. Eligibility criteria usually involves being in business for a set period of time and earning a certain amount of revenue.
Secured business loan. A common choice for new franchisees looking to fund a franchise venture, a secured business loan requires that the applicant put up residential property as security for the loan. The lender will organise a professional valuation of the property to determine its value and will make its offer based on that and other factors. In addition, some lenders will require additional security for the loan in the form of an external guarantor, a director's guarantee, or a fixed and floating charge over commercial property.
Franchise loan. With a franchise loan, you are borrowing against the value of the franchise rather than against residential property. The advantage of a franchise loan is that it can involve a small deposit or a lower amount of equity. Similarly, the terms of a franchise loan can be more flexible than a business loan. On the other hand, the term of a franchise loan is capped at the initial term of the franchise agreement, whereas the term of the business loan could potentially extend up to 30 years.
Franchisor finance. Approval for franchise finance can be a challenge, which is why some franchisors have created in-house programs to assist people to obtain finance. For example:
- Bedshed has been operating for more than 30 years and offers vendor finance for some franchisee applicants who are unsuccessful in obtaining franchise finance through other means.
- Xpresso Mobile Cafe has negotiated commercial banking arrangements with the ANZ as well as finance brokers and equipment finance funders and offers to assist potential franchisees to obtain finance to fund their own franchise.
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