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Franchising is a popular business model in New Zealand used by owners to grow their businesses. It involves businesses licencing their branding to another individual who can then replicate the business elsewhere. The person replicating the business becomes ‘the franchisee’, and the person who licences their branding becomes ‘the franchisor’. The franchisee then pays franchise fees to the franchisor in exchange for the licence. If you are looking to get into business, then you should consider buying a franchise. This is because your chance of success is higher if you are running an already established brand. One type of franchise you could buy is a food truck franchise. This article will explain what you should consider when you are looking into buying a franchise food truck

Food Licences

Before you buy a food truck, you should make sure that you have the correct food licences. This is because if you do not have the correct food licences, then your food truck may be shut down. Food businesses, including food trucks, have to be registered before they can start preparing or serving food. You can register your business with the Ministry for Primary Industries (the MPI) or your local council. Certain types of food may require special licences, so it is essential that you follow the correct steps.

In addition, having a food plan is the best way to ensure that you follow the correct procedures when preparing and handling food. One mistake could ruin your business, so you must get this right.

State of the Franchise

Before buying a franchise food truck, you should consider the state of the franchise. For example, this could involve finding out:

  • how many franchisees there are; and
  • whether they have been successful.

Consequently, if franchising has not taken off for that particular business then you should reconsider whether you want to buy into it. As part of the process, the franchisor will give you access to the financials of the franchise. Therefore, it is good practice to get an accountant to independently advise you about the potential success of the franchise. This is especially important with this business model in the competitive food truck industry.

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Franchise Fees

Another aspect of a franchise that you should look into is the amount of franchise fees you will have to pay. Franchise fees are a fee that you pay to the head franchisor in exchange for using the franchise’s branding. Of course, it is a necessary and important part of the franchise process, but you need to make sure that your franchise fees are not too high. Otherwise, this could negatively impact your financials. 

Franchise fees are usually charged as a percentage of your revenue. However, franchise fees can also be a fixed cost. 

Marketing Control

You should also find out the degree of control your franchisor has over the marketing of your franchise food truck. Generally, franchisors are in charge of all marketing, with some leeway given to franchisees to customise their branding. This leeway is important as it enables you to target your locality specifically. For example, a particular type of branding may work better in a specific area of the country or for a specific community. 

On the other hand, you should make sure that you are not stuck with doing all the marketing for your business as this can be costly and take away valuable time that you could spend working on your business. Striking the right balance is critical when it comes to marketing your franchise.

Territory

Finally, another important aspect to consider before you buy a franchise food truck is the territory your business can cover. As a franchise food truck, your business is mobile so you can travel to find customers. However, under the franchise agreement, your business will only be able to operate in a certain area due to other franchisees having control of other areas. You may be able to operate in other areas on days that other franchisees are not open. Alternatively, you may be able to operate outside your territory if there is an event that you would like to trade at. You should ensure that you are on top of this information so you can find as many customers as possible.

Key Takeaways

Buying a business is an important step towards becoming financially independent. However, there are many aspects that you should consider to heighten your chance of success. This is especially true if you are buying a franchise food truck. Your franchise agreement will usually outline these aspects, but in some cases you may have to ask your franchisor for further details. When buying a franchise food truck, you must take into account all legal considerations such as licences. You should also consider the degree of control the franchisor will have over your franchise. 

If you need help with buying a franchise food truck, 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

Can the amount paid in franchise fees be changed over time?

The payment schedule of your franchise fees will be outlined in the franchise agreement, and they may change over time.

What happens if I operate in another franchisee’s territory?

Your franchise agreement may outline a penalty for operating in another’s franchisee’s territory. However, there are unlikely to be repercussions if you have done this accidentally. 

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