6 Tips for Reducing Financial Stress in Your Franchise Business NZ

In Short:

• Choose a franchise that aligns with your expertise and experience for better financial management.

• Build strong relationships with lenders, vendors, and employees to reduce stress.

• Minimise costs by leasing equipment and choosing the right location, while planning for the future.

Tips for Businesses:

To reduce financial stress, select a franchise that suits your skills and experience. Prepare thoroughly for meetings with lenders, and prioritise a positive company culture to enhance employee retention. Minimise costs by leasing equipment and carefully selecting your franchise location. Always monitor cash flow and plan for future expenses.

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Table of Contents

• 1. Find the Right Industry
• 2. Meet With Lenders
• 3. Create a Positive Company Culture
• 4. Nurture Vendor Relationships
• 5. Minimise Costs
• 6. Think Ahead
• Key Takeaways
• Frequently Asked Questions

Hundreds of people in New Zealand enter the world of franchising each year. Buying a franchise is a relatively safe business model that can be very lucrative when you have the right strategy. However, managing finances in the franchise sector can be challenging. Learning to master cash flow management while mitigating inevitable financial stress is crucial for anyone wanting to run a successful franchise location. This article will take you through six practical tips for reducing financial strain and developing a smart, sustainable and practical approach to cash flow management in your franchise. 

1. Find the Right Industry

Managing a sustainably lucrative franchise location has a lot to do with picking one in the right field for you. This includes taking into consideration your: 

• field of expertise;
• temperament; and
• level of experience.

2. Meet With Lenders

Franchisees can receive financial assistance from certain banks, covering some of the set-up costs. This presents a significant opportunity for financial relief when setting up a franchise. However, it is essential to research and prepare thoroughly. When applying for funding, it is essential to have key information ready. This includes: 

• your financial history;
• your deposit; 
• assets; and
• a business plan.

By arriving at your bank meetings fully prepared, your chances of obtaining the necessary funds will increase substantially. 

3. Create a Positive Company Culture

Establishing a positive company culture is crucial for developing a reliable cash flow. It is essential to prioritise the needs and well-being of your employees so that your franchise can operate at peak productivity.

Further, fostering a positive company culture reinforces the message that you value and appreciate your employees’ efforts in building and sustaining the franchise. By creating a work environment that promotes employee satisfaction, you are both doing the right thing and making a sound business decision that can enhance employee retention.

4. Nurture Vendor Relationships

Developing and nurturing strong relationships with your vendors can be instrumental in building a sustainable franchise business model and managing your cash flow effectively. In addition, given that vendors deal with multiple clients and their pricing can fluctuate, forging lasting partnerships can help alleviate some of the cash flow challenges and boost your profits in the long run.

5. Minimise Costs

Another way to alleviate financial stress is to minimise costs where you can. This is particularly important when first opening your franchise. 

Similarly, choosing a site for a franchise business is another way to minimise costs. Further, your business location is a critical factor impacting your financial stress. While a prime location like a shopping centre may generate more foot traffic, the associated costs may outweigh the sales. Instead, it is essential to consider the following:

• the franchise’s operations;
• target area;
• potential customers; and
• minimum sales required per the franchise agreement.

While high-traffic locations offer consistent sales, they also have limitations. This includes higher rentals and set lease periods with no options. As a franchisee, consider growing locations with better prices instead. Ultimately, it is about selecting a location to give you the best return on investment.

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6. Think Ahead

Anticipating the future and comprehensively understanding your franchise location’s cash flow status is crucial for mitigating financial pressure. Avoid ignoring financial issues and proactively concentrate on what lies ahead. You should monitor trends and regularly monitor your spending and bank balance to stay informed. Business can be unpredictable, so staying one step ahead is essential.

Key Takeaways

Learning how to master cash flow management while mitigating inevitable financial stress is crucial for anyone wanting to run a successful franchise location. Some key tips for reducing financial stress at your franchise location include:

• finding the right industry; 
• meeting with lenders;
• creating a positive company culture;
• nurturing vendor relationships;
• minimising costs; and
• thinking ahead.

If you need assistance preparing to open a franchise location, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions