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When you purchase a franchise, you’re not only buying a business but forming a partnership as well. The experience, skills and willingness to work hard from both parties (franchisee and franchisor) will determine its success. Before buying a franchise, be sure to do these three things:

Get it valued

Get it valued

Obtain guidance

Obtain guidance

Do research

Do research

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Is franchising right for you?

Can you follow a ready-made system while respecting the rules of the franchisor? Do you prefer some level of guidance to start up and operate your own business? These are some of the types of questions you want to ask yourself when considering franchise opportunities. When you are choosing a franchise, be sure to look at the level of demand of the services or products that it offers, the competition, the level of support you’ll be receiving, the background of the franchisor and prospects for growth.

Types of franchises

Master franchising – where the national franchisor lets a ‘master franchisee’ sub—franchise the system to other franchisees, usually in a defined territory or country.

Turnkey franchising – in this form of business format franchise, the franchisor provides each franchisee with fully fitted-out, leased premises rather than just specifications of what they require. Retail franchises tend to be turnkey franchises.

Unit franchising - here a national franchisor grants a franchisee the rights to operate an outlet, or in a territory.

In-store franchising – when a store leases some space to another franchise system to use to develop an outlet within that area. For example, a department store may lease some space to a coffee franchise to create a win-win situation for both businesses.

Assess the costs of franchising

Franchising does come with some fees that need to be taken into account:

An Initial franchising fee – a one-time cost to use the franchise’s brand, operating system and to receive support. This could include costs for an operating license and start-up training.

Royalty payments – these are ongoing and typically between 4-8% of your gross revenue.

Advertising fees – these can include market research, merchandising, public relations and advertising campaigns. Marketing is generally done at a local, regional or national level. A franchisee committee with often have their say in how the money is spent.

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How to finance your franchise

If you need help to get your franchising business started, Meridian can help. We can provide you with flexible franchise lending options, financial advice and support, business credit cards and more. Want to get started? Here are some things that will help you get prepared:

A statement of your personal financial position – outlining your assets, liabilities, monthly income and expenses.

A business plan – so we can understand your long-term goals and business strategy.

A cash flow forecast – projecting the expected cash moving in and out of you franchise over the coming year.

Your work and business history – so we can learn a little more about you and how you came to the decision to franchise.

Want to learn more about how to buy a franchise? Download Meridian's 10 step guide here.

Speak to a Meridian Small Business Advisor or a Relationship Manager today

to see which Franchising Banking Solution is right for you.