The short answer
Franchise finance funds the purchase of a franchise — the franchise fee, fit-out, equipment, initial stock and working capital. Lenders assess both the buyer and the franchise system, looking at the franchisor's track record, the disclosure document and, for resales, the site's own trading history. Most purchases combine the buyer's contribution with property-secured lending, equipment finance for fit-out equipment and a working capital facility. The disclosure document must be provided at least 14 days before signing.
Key points
- The total cost of buying in is much more than the franchise fee.
- Lenders assess the franchise system as well as the buyer.
- You must receive the disclosure document at least 14 days before signing; a 14-day cooling-off period applies to new agreements.
- Resale franchises can be easier to fund because the site has trading history.
Buying a franchise promises a proven system, a known brand and support from people who’ve done it before. Financing one, though, raises questions that aren’t obvious until you’re in the middle of it: why the franchise fee is only part of the cost, why lenders want to see the franchisor’s paperwork, and why a resale site can be easier to fund than a brand-new one. This guide works through them.
What does it really cost to buy a franchise?
The franchise fee gets the attention, but it’s often a minority of the total. A realistic budget includes:
| Cost | What it covers | Often funded by |
|---|---|---|
| Franchise fee | The right to operate under the brand and system | Buyer’s contribution or property-secured loan |
| Fit-out | Shop fitting, joinery, signage, plumbing, electrical | Buyer’s contribution or property-secured loan |
| Equipment | Kitchen equipment, coffee machines, refrigeration, POS | Equipment finance |
| Initial stock | Opening inventory | Working capital |
| Professional fees | Lawyer, accountant, lease review | Buyer’s contribution |
| Training and travel | Initial training, sometimes interstate | Buyer’s contribution |
| Lease costs | Bond or bank guarantee, rent before opening | Buyer’s contribution or bank guarantee |
| Working capital | Wages, rent and bills until the site is profitable | Line of credit or working capital loan |
After opening, royalties and marketing fund contributions are ongoing costs that affect cash flow and serviceability. Under the Franchising Code changes, franchisors must also disclose as much information as practicable about significant capital expenditure franchisees may face in future, such as refurbishments — worth reading closely, because it’s future cash you’ll need.
What rules protect franchise buyers?
The Franchising Code of Conduct, overseen by the ACCC, sets out several protections relevant to financing:
- Disclosure document. The franchisor must give you the disclosure document at least 14 days before you sign the franchise agreement.
- Final agreement. The ACCC says you must be given a copy of the franchise agreement to consider during the disclosure period, in its final form apart from minor changes.
- Cooling-off. The ACCC refers to a 14-day cooling-off period for new franchise agreements.
- Newer disclosure requirements. A new Code took effect on 1 April 2025, with additional disclosure obligations — including significant capital expenditure and specific purpose funds — from 1 November 2025.
These timeframes matter for finance, too. Build the lender’s assessment into the disclosure period, so you know your funding position before the cooling-off period ends.
What do lenders look at?
Franchise lending combines two assessments.
The franchise system:
- how long the system has operated and how many sites it has;
- franchisee turnover and closure history (the disclosure document is a key source);
- the franchisor’s financial position;
- whether the lender has reviewed or accredited the system before.
You and the site:
- your contribution, experience and credit history;
- for a new site, the location, lease terms and the franchisor’s projections;
- for a resale, the site’s own financial statements and BAS;
- the combined cost of repayments, royalties and marketing levies against expected earnings — the serviceability test.
Some lenders have pre-approved certain franchise systems, which can simplify the process. Others assess each deal from scratch. If the system is newer or smaller, expect more questions.
New site or resale?
| New site | Resale | |
|---|---|---|
| Evidence | Franchisor projections | Actual trading history |
| Lender comfort | Lower; relies on system and projections | Higher; can verify figures |
| Fit-out | Full new fit-out | Existing, possibly needing refurbishment |
| Price | Set by the franchisor | Negotiated with the outgoing franchisee |
| Goodwill | Not applicable | Part of the price, harder to fund |
A resale is usually easier to finance because the lender can see what the site actually earns. But the price may include goodwill, which lenders are cautious about funding on its own. Our business acquisition loans entry explains how buyers bridge that gap.
What funding structures are common?
Most franchise purchases combine several sources:
- Buyer’s contribution — cash or equity, which lenders expect to see.
- Property-secured loan — often over the buyer’s home, funding the franchise fee, fit-out and any goodwill.
- Equipment finance — for identifiable equipment, secured by the equipment itself.
- Working capital facility — a line of credit or small loan to carry the business through its first months.
- Bank guarantee — sometimes required by the landlord instead of a cash bond.
Splitting the purchase this way often produces better terms than one large loan, and keeps property-secured borrowing to the part that genuinely needs it. If you’re weighing a franchise, you can ask a specialist to sketch the structure before you commit.
How do ongoing franchise costs affect your borrowing?
Royalties and marketing levies are usually calculated on sales, so they rise as the business grows and never go away while you’re in the system. Lenders deduct them before working out what’s left for loan repayments, alongside rent and wages. A site that looks comfortably profitable before royalties can look much tighter after them. When you model your own numbers, run the repayments, royalties, levies and rent together, and test them against a slower first year.
What questions should you ask before signing?
- What’s the total cost to open, and what’s the franchisor’s estimate of working capital needed until break-even?
- What royalties and marketing levies apply, and how are they calculated?
- What future capital expenditure — refits, upgrades — is expected, and when?
- What do existing and former franchisees say? The disclosure document should help you find them.
- Who guarantees the lease, and for how long? See personal guarantees.
- What happens if you need to sell or exit early?
A franchise lawyer and an accountant familiar with the sector are worth their fees here.
What do lenders make of franchisor projections?
Cautiously. Projections for a new site are an estimate, and lenders know that early months often underperform the plan while a site builds its customer base. Expect a lender to test whether the business could still meet its repayments, royalties and rent if sales came in below forecast for the first year. Having working capital in place for a slower start makes that test easier to pass — and makes the first year far less stressful for you.
Should you use the franchisor’s recommended lender?
Some franchise systems have relationships with particular lenders, which can speed things up because the lender already knows the system. It’s still worth comparing. A recommended lender isn’t obliged to offer the best structure for your circumstances, and your own property, credit history and contribution may suit a different lender better.
Worked example (illustrative)
Illustrative only; no real franchise system. A former hospitality manager plans to buy a new site in an established café franchise. The total cost to open, including fit-out, equipment, fees and working capital, is substantial. She has savings and owns an apartment with a moderate mortgage.
The structure: her savings cover professional fees and part of the franchise fee; a second mortgage over the apartment funds the rest of the franchise fee and the fit-out; equipment finance covers the coffee machines, ovens and refrigeration; and a small line of credit covers wages and stock for the first months. The lender reviews the disclosure document during the 14-day disclosure period, so finance is confirmed before she signs.
Ready to fund your franchise?
A franchise is a big step, and the right funding structure makes the first year far less stressful. Our enquiry takes about 60 seconds and there’s no credit check when you first enquire. We don’t circulate your details to a pile of lenders — a real person looks at the franchise, the costs and your position, then calls you. Please give accurate figures for the total cost, your contribution and any property you own, so we can match the right structure first time.
Frequently asked questions
How much does it cost to buy a franchise?
It varies enormously by system and site. Beyond the franchise fee, expect fit-out, equipment, initial stock, legal and accounting fees, training costs, and working capital to carry the business until it's profitable. Ongoing royalties and marketing levies follow.
Do banks lend for franchises?
Some banks have franchise lending programs for established systems they've reviewed. Other buyers use non-bank lenders, property-secured loans or equipment finance. Appetite depends heavily on the specific franchise system.
What is the franchise disclosure document?
A document the franchisor must give prospective franchisees at least 14 days before a franchise agreement is signed, setting out detailed information about the franchisor, the system, costs and obligations. Lenders often ask to see it too.
Is there a cooling-off period when buying a franchise?
The ACCC refers to a 14-day cooling-off period for new franchise agreements. Check the current rules and your agreement with your lawyer before signing.
Is it easier to finance a resale franchise?
Often, because the site has its own financial history. Lenders can assess actual performance rather than projections, which usually makes the decision more straightforward.
Can I use equipment finance for a franchise fit-out?
For identifiable equipment — ovens, coffee machines, refrigeration, point-of-sale hardware — yes. Fixed fit-out works such as joinery and plumbing are usually funded through other means.