The Complete Guide to Franchise Finance in Australia

Franchise finance is a category of business lending specifically designed for the purchase, establishment, or expansion of franchise operations. Unlike general business loans, franchise finance takes into account the strength of the franchise system, the franchisor brand, and the proven business model when assessing risk. Lenders maintain dedicated franchise panels listing accredited systems they are willing to fund, which can significantly improve approval rates and terms compared to standalone business lending. Loan amounts typically range from $50,000 to over $1 million, with terms spanning 1 to 15 years depending on the type of asset being financed and the franchise agreement term.

There are three primary franchise acquisition types, each with different funding considerations. Greenfield franchises involve establishing a brand-new outlet from scratch, requiring finance for the franchise fee, fitout, equipment, working capital, and sometimes a lease bond. Existing franchise purchases involve buying an operating business from a current franchisee, where goodwill, plant and equipment, and stock are the main cost components. Multi-unit expansion involves an existing franchisee acquiring additional territories or outlets, leveraging their track record and existing relationship with the franchisor to secure better lending terms. Each type has a different risk profile, and lenders assess them accordingly.

Major banks and many non-bank lenders maintain franchise accreditation panels. An accredited franchise system has been assessed by the lender and deemed lower risk based on factors such as the franchisor financial strength, system-wide performance data, franchisee success rates, and brand recognition. Borrowers purchasing accredited franchises benefit from higher LVRs, lower interest rates, faster approvals, and reduced documentation requirements. Non-accredited systems can still be financed, but lenders will conduct more detailed due diligence, typically require more equity, and may charge higher rates. Well-known accredited brands in Australia include McDonald's, Subway, Anytime Fitness, Jim's Group, and many more across food, retail, and services sectors.

Franchise finance is typically structured as a combination of products. A business loan covers the franchise fee and goodwill with terms of 5-7 years. Equipment finance via chattel mortgage or lease covers fitout, machinery, and vehicles with terms of 3-7 years. A commercial property loan applies if you are purchasing the premises. An overdraft or line of credit provides working capital. Interest rates vary widely: accredited systems with strong borrowers attract rates from 5-8% p.a. through major banks, while non-accredited systems or borrowers with limited experience may see rates from 8-15% p.a. through non-bank and specialist lenders. The blended cost across multiple facility types determines your overall financing cost.

The instant asset write-off scheme allows eligible businesses with aggregated turnover under $10 million to immediately deduct the cost of individual depreciable assets up to $20,000 each through to 30 June 2026. For franchise fitouts, this can apply to individual items such as commercial kitchen equipment, point-of-sale systems, furniture, signage, and vehicles. Assets costing more than $20,000 are placed in the small business simplified depreciation pool at 15% in the first year and 30% thereafter. Strategic purchasing — splitting orders into individual items where each is under the threshold — can maximise the tax benefit. Always consult your accountant to ensure compliance with ATO requirements and to confirm your eligibility under the simplified depreciation rules.

Undercapitalisation is the leading cause of franchise failure. Many new franchisees underestimate working capital needs during the establishment phase, particularly for greenfield sites where revenue takes time to build. Other common pitfalls include failing to independently verify the franchise disclosure document, not engaging a specialist franchise lawyer before signing, overestimating revenue projections based on franchisor marketing materials, ignoring the total cost of ongoing royalties and marketing levies when assessing serviceability, choosing a poor location under pressure from the franchisor, and not building adequate cash reserves for unexpected costs such as equipment breakdowns or staff shortages. Allow for 3-6 months of operating expenses as a cash buffer beyond your loan facilities.

Before committing to a franchise investment, conduct thorough due diligence. Review the Franchise Disclosure Document carefully, noting any litigation history, franchisee turnover rates, and financial performance representations. Speak with current and former franchisees about their experience. Engage an independent accountant to review the financials and verify earnings claims. Commission a market assessment of your proposed territory. Understand the full fee structure including franchise fees, royalties (typically 4-8% of gross revenue), marketing levies (1-3%), and technology fees. Ensure the franchise agreement term aligns with your loan term to avoid refinancing complications.

Our team understands the nuances of franchise lending across accredited and non-accredited systems. We maintain relationships with all major bank franchise panels as well as specialist non-bank lenders who fund franchise acquisitions outside mainstream criteria. We structure your finance across multiple products to minimise total cost, maximise tax efficiency, and ensure adequate working capital. Whether you are a first-time franchisee purchasing a single outlet or an experienced operator expanding your portfolio, we present your application to the lenders best suited to your specific franchise system and financial profile.