“Hey honey, I’m thinking of buying a franchise!”

“Hey honey, I’m thinking of buying a franchise!”

Awkward silence…

“Err.. that’s great babe… ”

But the internal dialogue is quite different…
“That’s ridiculous! How are we going to pay for that?!”
“Will we have enough money to live on?”
“What about the school fees?”
“What do you know about running a business, you can’t even keep the house clean?”

Buying a franchise is a big decision. It needs to be carefully considered before you dive in.

And you need to have a very good look at the numbers.

If you’re buying an existing business, you will have the previous figures to check out. There are specific numbers to check out, so be sure to get some advice on this.

But if you’re buying a greenfield territory, there are no previous figures, so you will need to put some estimates together. And there should be a sound basis behind the assumptions you use.

The franchisor will be able to provide figures they have collected from their franchisees over the years. This can be a useful guide by showing what others have done. But it is no guarantee of your success. That is very much up to you!

A pre-purchase review is a critical component of your due diligence before you buy a franchise. Just like an inspection before you buy a house, you want to know what you’re getting into. The PPR reviews the set up costs of the franchise, the expenses you’re likely to incur in your first year of trading, and what level of sales you need to cover these costs and make a decent living.

Having the family discussion about buying a franchise has more substance to it when you have a pre purchase review to show the financial implications.

Let me know if you’d like to discuss a Pre purchase Review. Fixed price $965 + gst.

Peter

5 reasons your franchise network sales aren't going up

If you’re not seeing growth in franchise network revenue then you may have a problem. Of course, sales growth isn’t everything, but static sales will eventually lead to decline. And that is likely to lead to trouble for your franchise network.

This topic matters because the Australian economy hs been weak for a long time. With low inflation and low growth, there are no free rides when it comes to sales growth. If you want to grow the top line you’ll need to take business from a competitor or create new demand.

As the accountant in your leadership team, you’re likely to spot the trends in the numbers and be the person bold enough to ask the awkward questions.

To help you get to the heart of the issue, here are 5 questions to address (hopefully in a forthright way)

• Have we clearly defined our revenue growth target?

• Do our franchisees know the growth targets and how these apply to them?

• Is our advertising spend producing results in terms of leads? If we’re getting leads and they aren’t converting, what do we need to do?

• Are we leaving too much to the franchisees, relying on them to drive the top line without us taking responsibility?

• Do our franchisees know how to build sales? Do they have the resources they need and know how to use them? How can we better help them in this?

Part of the CFO’s role in a business is to help people interrogate the numbers and to ask good questions. We hope these questions are helpful in your franchise.

"Do I really need a Pre purchase Review?"

A client asked me if she really needed a Pre purchase Review.

As an accountant, I’ve done many Pre purchase Reviews. I’m convinced how important they are. But she wasn’t sure.

So rather than try to convince her, I just asked her some questions, to let her decide at her own pace.

• Are you comfortable working with numbers?

• Do you know much about this franchise?

• Are they making decent profits?

• Can you see yourself working in the business?

• How long will it take you to get your money back?

• Can you get the finance you need?

• How much will it cost after you’ve paid the up front fees?

It turned out she was pretty confident with figures and had good answers for these questions.

I wasn’t sure if she would ask us to go ahead, so we left it for a while.

Then a week later, she asked us to proceed with the pre purchase review. She said it wasn’t because she couldn’t do it herself, she just wanted another set of eyes to check over the numbers.

So that’s what we did.

In fact, we used some of the workings she had prepared and incorporated them into our report.

We like working with our clients in a collaborative way. We’re not going to push ourselves onto you, we’re not pushy that way. We like to work with you the way we like to work with others. In a co-operative way.

If this sounds like something that would work for you, then feel free to contact us.

We look forward to working with you

Peter

Why you need to check the wages figure when you buy a franchise

If you're looking to buy a franchise that's up and running, you'll receive financial information from the vendor. That means a Profit and Loss Statement. 

One of the lines will be staff wages. This is an important number to have a think about.

What should you ask?

Does this include wages for the owner?

How many people are employed?

Show me some examples of the weekly roster?

Why? 

You need to be able to pay the people the correct wages.