Reading time: 5 minutes

Have you thought about buying a business but are unsure if it will be successful? Getting into a franchise is one of the best ways to maximise your chances of success when doing business. The main reason for this is that you are buying a business already trading under the same branding. Thus, franchise opportunities mean that your business will already have that name and product recognition for your customers. Once you buy a franchise, you become the franchisee, and the person who owns the business is the franchisor. One example of an industry that commonly utilises franchises is the fast-food industry. Businesses such as the McDonald’s franchise have taken advantage of this system to scale their business worldwide using fast-food chains. This article will explain what things you should consider before you buy a fast food franchise in New Zealand. 

State of the Financials

The first thing to consider when you buy a fast-food franchise is the state of the business’ financials. The financials include the income statement and the balance sheet. These statements will tell you how well the business is doing and whether there is room for growth. Financial statement analysis is critical as poor financials will lead to an unsuccessful business.

It is always best to employ an accountant to analyse the financial statements to have a clear interpretation of what they mean. This will give you a good idea of the business’ sales and the financial viability of this business model.

Supplier Agreements

You should also consider what supplier agreements the business has in place before you buy a fast-food franchise. For example, your franchise agreement may state that there are certain suppliers that you must use as all franchisees use them. However, if not, you should make sure that you can get out of your supplier agreements if need be. This is because you want to be using the cheapest and most reliable suppliers, and you do not want to be contracted to a supplier who cannot deliver.

Scope of the Franchise Agreement

The scope of the franchise agreement is also a crucial aspect to consider when buying a fast-food franchise. The franchise agreement governs the relationship between a franchisee and a franchisor. The degree of control that the franchisor has over the franchisee can determine whether you should be buying into their franchise business or not. For instance, franchisors will generally have control over all marketing aspects. However, you should be able to change this to suit your franchise business. They may also have control over your business structure, so you should make sure that you are comfortable with this.

Food Safety Laws

You must follow all food safety laws when you operate a fast-food business. There may be specific licences that you have to get before you can prepare or serve food. In addition, you will need to register your business with the local council or with the Ministry of Primary Industries before you start operating.

In addition, you must have a food plan in place so that there is no risk of contamination. Any mistake could lead to your business being shut down. Even if your business is not shut down, your reputation could suffer if something goes wrong. Therefore, you should think about continually reviewing any food plan that you adopt. Your franchisor may be able to provide you with one that fits your business. This way, you can better maintain the quality of your food and a good reputation.

Location of Franchise

You should also make sure to pick the right location when you are buying a fast-food franchise. For example, you should consider whether the location is a growing market and whether it suits your product. To find out, you might consider undertaking market research of the area and whether there is any competition in your location. 

Key Takeaways

Buying a franchise is a great way to own your own business as it allows you to leverage an already established brand. Trying to start a brand from scratch can be challenging, as you have to convince customers that your product or service is right for them. However, if they already have seen this product or service in another area, then they are familiar with it. Fast-food employs franchising models as it allows them to grow quickly with little capital. If you are looking to buy a fast food franchise, you should consider certain things such as the state of the financials and following the correct food safety laws. For legal assistance with franchising, contact LegalVision’s New Zealand franchise lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions.

Can I alter the franchise agreement?

You can only alter the franchise agreement after you have signed with the permission of the franchisor.

Will my franchisor control my business?

Your franchisor will not have anything to do with your business’s day-to-day operations, but the franchise agreement may set limitations on what you can do. 

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2019 Top 25 Startups - LinkedIn
  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards