Franchise finance, in three simple steps

What does franchise finance cover?

Buying a franchise isn’t just paying a franchise fee. A typical budget includes:

• The initial franchise fee
• Fitout to the franchisor’s design and specifications
• Equipment, often from approved suppliers
• Opening stock
• Training and launch marketing
• Lease costs, such as a bond or bank guarantee
• Working capital to carry the business until it breaks even

Franchise finance is any funding used for those costs. Most buyers use a mix: their own contribution, equipment finance for movable items, and a loan for the rest.

What do lenders look for in a franchise deal?

Three things more than any others:

1. The system. How long has the franchise operated in Australia, how do outlets perform, and how many have closed or changed hands?
2. You. Your industry or management experience, your contribution and your credit history.
3. The site and the numbers. Location, lease terms and realistic forecasts for this particular outlet.

A well-known system with solid outlet performance makes a lender’s job easier. A newer or struggling system means more questions, and possibly more security.

How does the Franchising Code help me?

It gives you information and time. The ACCC explains that the new Franchising Code of Conduct started on 1 April 2025, with additional rules taking effect from 1 November 2025, including disclosure of significant capital expenditure. According to the ACCC, you should receive the franchisor’s disclosure document no later than 14 days before you sign the franchise agreement.

Use those 14 days well:

• Have an accountant review the financial information and your forecasts
• Have a lawyer review the franchise agreement and lease
• Speak with current and former franchisees
• Check what ongoing fees, marketing levies and future capital expenditure you’ll be expected to pay

Lenders will ask about much of this too, so the homework helps your application as well as your decision.

Which funding options suit franchises?

Situation	Often suits
Brand-new outlet, buyer owns property	Property-secured loan, $20k – $5m
Existing outlet with trading history	Unsecured lending sized on turnover, or secured
Equipment from approved suppliers	Equipment finance
Fitout to franchisor’s design	Unsecured or property-secured; see fitout finance

New outlets have no trading history of their own, which makes unsecured lending harder. That’s why buyers who own property often find a property-secured loan the most realistic route. If you’re buying an established outlet, its own bank statements and financials can support the application. Our page on buying an existing business covers that path.

If you’d like help shaping the mix, send a 60-second enquiry. There’s no credit check to ask.

How much working capital should I budget?

More than most first-time franchisees expect. New outlets take time to build a customer base, and wages, rent and royalties start from day one. Ask the franchisor and existing franchisees how long typical outlets take to break even, then budget for that period plus a margin.

Illustrative example only. A couple buying into a café franchise budget the franchise fee, fitout and equipment carefully, but initially allow only one month of working capital. After talking to two existing franchisees, they learn most outlets took several months to settle into steady trade. They increase the working capital in their funding request, fund the coffee equipment separately through equipment finance and use equity in their home for the balance.

Questions to ask before signing

• What are all the ongoing fees, and how are they calculated?
• What future refurbishments or upgrades will be required, and when?
• What happens if I want to sell or exit?
• What support does the franchisor provide in the first year?

Common franchise budgeting mistakes

First-time franchisees often underestimate the same few things. Watch for:

• Ongoing fees on top of loan repayments. Royalties and marketing levies come out of revenue every week or month, so they need to be in your cash flow forecast alongside repayments.
• Ramp-up time. Forecasts based on mature outlets can overstate early trading. Ask what newer outlets earned in their first year.
• Lease costs before opening. Rent may start before trading does, especially during the fitout.
• Future capital expenditure. Refurbishments required by the franchisor partway through the agreement can be significant. The new code’s rules on disclosing significant capital expenditure are designed to help you see these coming.
• Personal living costs. If you’re leaving a salaried job, budget for how you’ll live until the business pays you.

Building these into the plan before you borrow means your funding request reflects reality, which lenders appreciate and which protects you if trading takes longer to build.

For the fitout itself, our fitout finance page explains why fitouts are usually funded unsecured or with property. If you’d rather start without a franchise system, see new business loans for the realistic paths open to first-time owners.

Ready to fund your franchise?

A franchise can be a great way into business ownership, provided it’s funded properly from day one, including the months before it pays its way.

When you enquire, there’s no credit check. A real person reads your details and calls you to talk it through, and your information isn’t passed around to a crowd of lenders. Please be accurate on the form, especially the total budget, your contribution and any property, so we can match the right structure on the first call. Ask about franchise finance.