Franchising runs on someone else's calendar
Owning a franchise gives you a proven system, but it also gives you obligations you don't fully control. The franchisor sets the dates for a store transfer to complete. The franchise agreement may require a full refurbishment at a set point or on renewal. Marketing levies, royalties and technology fees come out on schedule. The franchisor may offer you a second territory or a new site, but only if you can commit by a deadline.
Meanwhile, trading follows the same pressures as any other business: seasonal swings, wage increases, supplier price rises and the ATO. Food franchises in particular deal with thin margins and big labour bills. Service franchises can have vehicle and equipment costs. Retail franchises deal with stock and shopping centre leases.
Common franchise pressure points
- Purchase or transfer of a franchise with a fixed completion date
- Mandatory refurbishments and re-imaging on renewal
- Opening a second site or territory within the franchisor's window
- Transfer fees, training costs and opening stock
- Quiet trading periods with fixed royalties and levies
- ATO debt from PAYG and GST
Franchise scenarios
| Franchise type | Scenario | Exit |
|---|---|---|
| Quick service food | Refurbishment required to renew the franchise agreement | Refinance once the renewal is signed |
| Café franchise | Buying an existing store with a franchisor-set completion date | Bank refinance |
| Service franchise | Buying a second territory and two vehicles | Business cash flow from the new territory |
| Retail franchise | Opening a second store in a new centre | Refinance once the store is trading |
| Fitness franchise | ATO debt and arrears after a slow year | Refinance or sale of an investment property |
| Any franchise | Franchisee selling the store, settlement pending | Sale of the franchise |
These scenarios are examples only. Every loan is assessed on its own scenario.
Why franchise finance can drag
Some banks have franchise lending programmes, but they still want financials, a business plan, franchisor documents and a credit check, and they may only lend to approved brands. Approval can take weeks or months. A bank refinance commonly takes up to three months or more, and you may not be approved for the amount you need. If the franchisor's completion date is sooner than that, you risk losing the deal.
Cash flow lenders can move fast, but they lend off bank statements and often take frequent repayments, which competes with royalties and wages. For a comparison, see our cash flow loan alternative page.
How Equity Tap lends to franchisees
Equity Tap lends $50k to $5m for one to twelve months, secured by a first mortgage, second mortgage or caveat over residential or commercial property anywhere in Australia. Most franchisees use their home or an investment property. We aren't limited to approved brands, because we lend against the property, not the franchise.
We don't need tax returns, BAS, profit and loss or bank statements, and we don't order a valuation before approval. There's no credit check at initial assessment, and an ATO debt or past decline isn't automatically a problem. We need ID, property and mortgage details, the purpose and evidence of the exit.
Interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments while the refurbishment is done or the new site builds trade. Interest is not waived, and you see the full cost before you proceed. We take the time to make sure you understand the loan, the costs and the exit.
Exits for franchisees
- Bank refinance once the purchase, renewal or new site is complete
- Trading cash flow from a new site or territory
- Sale of the franchise or another store
- Sale of an investment property
Read more about choosing an exit in our exit strategy guide.
What we need from a franchisee
ID, the security property and existing mortgage details, what the money is for and evidence of the exit. Depending on the purpose, that could be the franchisor's transfer or refurbishment requirements, the contract to buy the store, or a bank's indicative offer for the long-term loan. You won't need to pull together financial statements or bank statements to get an answer.
From first call to funds
Call us with the store, the franchisor's deadline, the property and the exit. Conditional approval can often be given on the phone, with a term sheet in about 30 minutes once we have the scenario. Eligible loans can settle in as little as 24 hours, which can be the difference between meeting the franchisor's date and missing it.
Broker note
Franchise clients often have a franchisor deadline that doesn't match the bank's timetable. Send the scenario through the broker page. We can bridge the purchase or refit and you place the long-term facility behind us.
Also see cafés and restaurants, retail businesses and childcare centres. Apply online or call 1300 123 024.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Can I borrow to buy a franchise?
Do you only lend to approved franchise brands?
My franchisor requires a refit to renew. Can you fund it?
Do you need franchisor documents or financials?
Can I open a second store with this loan?
Will I have repayments while the new site builds trade?
How fast can you meet a franchisor's deadline?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.