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Starting a franchise in WA
Find out everything you need to know about purchasing a franchise business in Western Australia.
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For decades, Western Australia was known as the resource centre of the country. People flocked to WA from other parts of Australia and around the world to take advantage of its mining boom, which caused unprecedented economic growth and soaring prices throughout the state.
Despite boasting an enormously large geographical area, approximately 80% of the population of WA live in Perth. Other densely populated areas within the metropolitan area include Mandurah and Fremantle, while Bunbury and Albany have shown strong growth in the south. The top north end of Western Australia in the Pilbara and Kimberley regions has seen the majority of the mining action over the past few decades.
What type of franchises could be successful in Western Australia?
The Western Australian economy spent several decades at the top of the game during the peak of the mining boom. Now, the state is suffering economically, still dealing with high prices across the board but with many people losing their jobs in the mining sector and staying to seek alternative employment or leaving the state altogether.
Now does not seem to be the time to start a franchise in the tourism or luxury products or services industries in WA. Instead, people are looking for low-cost childcare options as they take on additional work to supplement their incomes. Additionally, franchises that offer low-cost time-saving solutions, such as home services like cleaning, could be successful as time poor people look to outsource time-consuming household tasks but without breaking their family budget. Low-cost financial advising services and other financial franchises could also be successful, as people look to refinance their debts to prepare themselves for life at a lower income.
Franchise financing options to compare in WA
Laws relating to business and franchising in WA
Western Australian businesses are bound by both federal and state laws. Administered by the Australian Competition and Consumer Commission (ACCC), the Competition and Consumer Act 2010 (CCA) is federal legislation that covers business trading. A broad, far-reaching piece of legislation, the CCA applies to the majority of businesses, including franchises, in Australia.
The Franchising Code of Conduct forms part of the CCA and is binding on all parties to a franchise agreement. In Western Australia, the ACCC is located on the 3rd floor of the East Point Plaza, 233 Adelaide Terrace, Perth.
The Fair Trading Act 2010 is the relevant state legislation in Western Australia.
Costs of starting a franchise
Example initial costs of franchises currently available in Western Australia are as follows:
- SIGNWAVE is a signage franchise that provides traditional signage as well as digital signage solutions and requires an initial investment from $300,000.
- Lava Carts is a specialty coffee retailing franchise that, despite its name, is not a mobile coffee franchise. Typically located in convenient locations like shopping centres, franchisees need to invest at least $180,000 for a franchise.
- Just Better Care is an in-home care service franchise which caters to aged and disability services, respite care, cleaning and maintenance. The initial investment requirements start from $110,000.
Finding finance
How can I finance the purchase of a franchise in WA?
If you've got your heart set on purchasing a franchise in Western Australia, here are some of the finance options available to you.
Business loan.
Lenders offering unsecured business loans will lend to businesses that can meet various eligibility criteria, typically revenue and time in operation. You will usually be able to borrow up to $500,000 and repay it over three months to five years.
Lenders offering secured business loans will typically lend up to 80% for loans up to $1 million, and up to 70% for loans up to $5 million. However, the terms of a business loan will vary from lender to lender, so it always pays to shop around. In general, a business loan will have a term of between 25 and 30 years and require appropriately-valued residential property as security for the loan.
Franchise loan.
A franchise loan will generally only be offered in the case of reputable, accredited franchises. Franchise loans have terms that are directly linked to the term of the franchise agreement, which is generally around five years and is unlikely to be longer than ten years. The amount of the loan be based on the lender's perceived value of the franchise itself, which may not correspond with the purchase price that you have negotiated with the franchisor. A franchise loan can include an amount to cover all aspects of the initial setup and purchase of the franchise but will not make allowances for initial or ongoing working capital.
Franchisor finance.
While this doesn't apply to all franchises, some franchisors offer their own finance schemes to help people get started in their own franchise. For example:
- Zambrero is a Mexican food chain with a variety of franchise models, from food court shops to drive-throughs and kiosks. Accredited with several banks, Zambrero offers to help potential franchisees to obtain finance by using their considerable contacts in the financial services industry.
- Muffin Break is associated with all four of the Australian Big Four banks and aims to assist franchise applicants to obtain finance to purchase a franchise.
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