Printing Franchise Finance
Dreaming of a printing franchise? Find out how to get your printing franchise finance application approved.
A printing franchise provides a valuable service to individuals and to small and medium businesses alike.
Snap Printing, Kwik Kopy, Worldwide Printing Solutions – some printing franchises are household names, just like any fast food outlet or service station. Why? Because printing franchises provide an indispensable service to individuals and to small and medium businesses throughout Australia. Demand for printing services continues to grow, and print shops have been able to change and evolve with advancements in technology and the ever-changing printing needs of businesses, which now include graphic design and web design in addition to evergreen printing services like business cards, brochures and publications.
Costs and profitability
How much does a printing franchise cost in Australia?
Startup costs for printing franchises in Australia include the following:
- Kwik Kopy. A new Kwik Kopy in a fresh location has startup fees of approximately $250,000. The cost of purchasing an existing Kwik Kopy printing franchise will depend on its location and turnover, but budget at least $210,000.
- Snap Printing. Setting up a brand new Snap Printing franchise will cost at least $200,000, while purchasing an existing franchise could cost between $220,000 to $275,000 plus stock, depending on the store's location.
- Worldwide Printing Solutions. The initial investment required to set up a new Worldwide Printing Solutions franchise is a minimum of $150,000.
What other costs do I need to consider?
In addition to the initial franchise fee, franchisors continue to earn revenue from individual franchises through ongoing royalties, which are usually calculated as a percentage of the franchise’s takings. The obligation to pay royalties will continue for the life of the franchise.
For example, a Snap Printing franchise will see you paying 8% of your total takings back to the franchisor in royalties, with an additional 2% going towards a marketing levy. In addition, a mandatory monthly fee of $945 plus GST will cover your IT levy, providing various forms of IT support for your franchise.
Consider the following additional costs that are involved in setting up a printing franchise:
Security deposit for leased premises
Your new printing franchise will need office space. In addition to ongoing lease payments, you will also need to pay a security deposit. You should budget for a security deposit of at least three months' rent in addition to outgoings and GST.
If you are purchasing a printing franchise that is already a going concern, you don't need to worry about paying GST. However, if you are setting up a new printing franchise, 10% GST is payable on the purchase price. The good news is that you can claim the GST paid as a credit when lodging your next business activity statement.
Initial legal costs
Purchasing a printing franchise will undoubtedly incur legal costs, and this must be factored in when considering the total purchase price.
A printing franchise will have significant outgoings, and these will start from your very first day of business operation. Most lenders will not include working capital in the total amount of the loan, so you will need to ensure you have sufficient funds to finance your business in the short term.
How profitable are printing franchises?
As with most franchises, it is difficult to obtain figures showing profitability of new franchises, especially in the first few years of operation. However, figures available from established Kwik Kopy franchises shed some light on the profitability of printing franchises.
- A Kwik Kopy franchise in New South Wales's Central Coast brought in $238,000 in turnover in the 2015/2016 financial year, of which $53,000 was profit.
- A Kwik Kopy franchise in the Sydney West area earned $642,000 in the 2016/2017 financial year, of which $81,000 was profit.
- A Kwik Kopy franchise in ACT had a turnover of $645,000 in the 2015/2016 financial year, including $98,000 profit.
- A Brisbane Inner City Kwik Kopy franchise had a turnover of $667,000 in the 2016/2017 financial year, of which $203,000 was profit.
What options do I have to finance a printing franchise?
Printing franchises are one of a select group of franchise types that are approved by some of the major banks and other lenders. For example, Kwik Kopy is on the approved franchise list with both ANZ and Westpac, making it much easier to obtain finance from those lenders than from others.
Lenders review and amend their lists of approved franchises on a regular basis, so it is always a good idea to make initial inquiries with different lenders as to whether printing franchises are currently on their approved lists. Consider asking for advice from the franchisor itself or getting in contact with other established franchisees.
When comparing finance options for a printing franchise, consider the following:
Franchise loan – approved franchise
Standard franchise loans will typically lend around 50-70% of the value of the business. If you can find a lender that is currently looking to finance a printing franchise, the loan amount will tend to be closer to 70%.
Like a business loan, a franchise loan will typically cover 50-70% of the purchase price. The major difference between a franchise loan and a business loan is the loan term. With a franchise loan, the loan term is directly linked to the term of the franchise agreement itself. As such, a franchise loan will tend to have a loan term between 5 and 10 years. Franchise loans will not include working capital.
Financing a less expensive franchise
Many lenders have minimum loan amounts for business and franchise loans, so it can be difficult to obtain finance for lower cost franchises. In this instance, a secured or unsecured personal loan may be a better choice.
A business loan typically has a loan term from 25-30 years and requires residential property as security.
Savings or equity
Consider using your own savings or refinancing your home before taking out a new loan. Depending on your circumstances, refinancing may be a better option.
Family or friends
In some instances, you may have a friend or family member willing to loan you the amount required to start your own franchise. In this case, it is always a good idea to have a legally binding contract drawn up to protect everyone's interests.
Some franchisors run their own schemes whereby franchisees can finance the new franchise directly through the franchisor. Always seek independent financial and legal advice before entering into such an agreement.
Business loans to compare
What should I consider when comparing my financing options?
- Interest rates. How does the interest rate offered by one lender compare to other lenders?
- Loan amount. What is the total amount that you are looking to borrow? Does this fit with the minimum lending amount for a franchise or business loan?
- Residential property. Do you have enough equity in your residential property to consider refinancing? Are you willing to put your residential property up as security for a business loan?
- Personal savings. Do you have any personal savings that you would be willing to invest in a franchise?
- Approved franchises. Do printing franchises appear on the list of approved franchises for any of the major lenders in Australia?
- Loan term. What loan term are you looking for? This will help you choose between a franchise loan and a business loan.
How do I get approved for finance?
Start by completing the loan application paperwork in full, providing copies of all documents as requested.
In addition, consider providing the following:
- Your résumé or CV, detailing all relevant qualifications and experience.
- A business plan for the franchise, including cash-flow forecasts.
- Full financial information – either for the business if you are purchasing an existing printing franchise or for yourself if you are setting up a new printing franchise.
Printing franchises have proven to be an evergreen business model that is able to keep up with changes in technology and the evolution of the printing needs of small to medium businesses. In addition to mainstay printing needs like letterheads, brochures and business cards, modern printing franchises now offer competitive web design and graphic design services. A stable industry with reliable profitability, printing franchises make excellent small business ideas for aspiring entrepreneurs.
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