Quick answer
To fund a franchise, add up the franchise fee, fit-out, equipment, stock and several months of working capital, then fund it with your own deposit plus a loan. Lenders assess the franchise system's track record, the site and you. Read the disclosure document first, because it tells you the costs the franchisor expects, and build a cushion for the slow start.
Key points
- The disclosure document is the best costing tool you have, and the Code requires you to get time to read it
- Franchise fee is often the smallest cost: fit-out, equipment and working capital usually add up to more
- Lenders assess both the brand's system and your personal capacity to operate it
- Ongoing royalties and marketing levies come out of sales, so they reduce the cash available for repayments
- Buying a resale unit means paying for goodwill, so the funding looks more like a business purchase
Franchise sales pitches have a way of focusing on the fee. “$45k to get started” sounds manageable, until a fit-out quote, a stock order and the first three months of rent arrive. Funding a franchise well is mostly about knowing the whole number early, then fitting the right finance to each part of it.
What does a franchise really cost to start?
Start with the franchisor’s disclosure document. Under the Franchising Code of Conduct, franchisors must give prospective franchisees certain information before they sign, including details of the fees and costs involved. The updated Code replaced the earlier one on 1 April 2025, and the ACCC says new disclosure obligations, including information on significant capital expenditure, apply from 1 November 2025. Read that section with a highlighter.
Then add what the document can’t know about your site.
| Cost | Typical funding fit | Comment |
|---|---|---|
| Initial franchise fee | Your deposit | Usually the hardest to borrow against, since it buys a right rather than an asset |
| Fit-out and signage | Term loan, or landlord contribution | Specified by the franchisor, so little room to economise |
| Equipment and vehicles | Asset finance | Secured on the asset, so often easiest to fund |
| Opening stock | Working capital | Pays back as you sell |
| Training and travel | Your deposit | Easy to forget |
| Lease deposit or bank guarantee | Your deposit or security | Landlords commonly want it up front |
| Working capital for the first 3 to 6 months | Line of credit or part of the loan | The item that decides whether you survive a slow start |
The ongoing costs matter just as much. Royalties and marketing levies are normally set as a share of sales, so they come out before the money available for loan repayments. In your forecast, deduct them from revenue, not from profit.
Who is in your corner under the Code?
The Code gives you more than most small-business purchases do. According to the sources below, franchisors must give you the disclosure document, the franchise agreement and the Code itself, and there is a minimum period to consider the documents before signing, along with a 14-day cooling-off right in many situations. Because the rules were updated in 2025, confirm the current periods in your own agreement with a franchising solicitor before you rely on a date.
Two free tools are worth using:
- The Franchise Disclosure Register is a government-run register of franchisor disclosure information. It isn’t an endorsement, and the information comes from franchisors themselves.
- The ACCC offers a free online franchising course aimed at people considering buying in.
If a dispute arises later, the ASBFEO can refer franchisees and franchisors to trained mediators and arbitrators.
How do lenders look at a franchise?
A lender has two things to judge: the system and you.
The system. Does the brand have a track record of similar units trading profitably? How many outlets have closed or been transferred in recent years? A larger, long-established system generally gives a lender comfort, though it’s not a guarantee. Many franchisors can provide a summary of typical unit economics, which is useful, but be aware that those numbers come from the seller of the opportunity. Ask to speak to existing franchisees, preferably ones the franchisor didn’t nominate.
You. Relevant experience, your deposit, your personal financial position and the security you can offer. Lenders commonly ask for a personal guarantee. A first-time owner joining a proven brand with a solid deposit is usually a better prospect than the same person starting from scratch. Our first business loan page covers how lenders treat a borrower with no history.
For the documents, expect to provide the disclosure document and franchise agreement, a forecast for the unit, your personal assets and liabilities statement, ID, and for a site lease, the offer or heads of terms. See franchise finance for the range of products.
If your question is “would a lender back me on this brand?”, ask us with the details. It takes about a minute and doesn’t affect your credit.
Resale or new site: how does funding differ?
Buying a new franchise means paying a franchise fee and building out a site. You carry fit-out and opening costs, and revenue starts from zero. Funding leans on asset finance and working capital.
Buying a resale means buying an existing franchised business from a current franchisee. You pay for goodwill and assets, and there is trading history, so it looks like any other business purchase. Do your own checking as well, using the due diligence cross-checks. The franchisor will normally need to approve the transfer, and the existing franchisee’s financials need testing: some resales happen because the unit isn’t working.
What is the smart way to layer the funding?
Match the product to the cost.
- Equipment on asset finance, with the asset as security.
- Fit-out on a term loan, or ask whether the landlord offers an incentive.
- Deposit and franchise fee from your own funds, or equity released from property if you’re comfortable with the risk.
- Working capital as a modest line of credit or part of the original facility, drawn only if needed.
Property security can lift the borrowing limit, but it brings real risk, so read risks of using your home as business security before agreeing.
A worked example: a fitness studio franchise
An illustration only. A buyer plans a franchised studio. The disclosure document estimates set-up costs of between $280k and $340k, and the buyer budgets at the top.
| Item | Amount |
|---|---|
| Franchise fee and training | $50k |
| Fit-out | $140k |
| Equipment | $90k |
| Opening marketing | $15k |
| Lease bond | $15k |
| Working capital, four months | $50k |
| Total | $360k |
The buyer finances the $90k equipment through asset finance with a deposit of $18k, borrows $140k for the fit-out, and keeps $50k of working capital in a facility. The remaining $98k, including the franchise fee, comes from $58k of savings and a $40k gift from a parent.
The key learning is that the realistic total landed $20k above the top of the franchisor’s range, because the lease bond and four months of working capital weren’t in the headline estimate. Adding a margin early avoided a forced scramble at opening.
Mistakes to avoid when funding a franchise
- Taking the franchisor’s range as the budget. It’s an estimate, and your site may cost more.
- Skipping the cushion. Most units take months to reach the break-even. Our guide to funding a slow start explains how to plan for it.
- Signing before finance is approved. Make the franchise agreement or lease conditional where you can, and take legal advice first.
- Ignoring the exit. Read the transfer, renewal and termination clauses so you know how you could sell or leave.
Ready to find out what a lender would back?
Banks are often an excellent first stop for a franchise, particularly for well-known systems, and if one will lend on your terms, that offer deserves serious attention. If the answer has been no, or the process is slower than your lease deadline allows, we can look at alternatives.
The enquiry takes about a minute and enquiring doesn’t touch your credit file. We don’t send your details to a stack of lenders, so there won’t be a rush of unexpected calls. Someone on our team reads your particular brand, site and budget, then phones you. Fill in the form accurately, including the total set-up estimate from the disclosure document, so the first option we raise has a good chance of fitting.
Frequently asked questions
How much deposit do I need to buy a franchise?
It varies by brand and lender. Lenders generally want to see a meaningful contribution from you, often a quarter to a third of the total outlay, though some will accept less with extra security such as property. Ask the franchisor what range lenders have accepted for their system.
What is the Franchising Code of Conduct?
It is a mandatory industry code, now made under the Competition and Consumer (Industry Codes - Franchising) Regulations 2024, that sets out what franchisors must disclose and how franchisors and franchisees must behave. The ACCC administers it. The updated Code started on 1 April 2025, with some disclosure rules phased in from 1 November 2025.
Where can I see a franchisor's disclosure information?
The Franchise Disclosure Register, run by the Australian Government, lists franchisor disclosure information. It doesn't replace the disclosure document you must receive directly from the franchisor, and the register doesn't endorse any franchisor.
Do franchisors help with finance?
Some have relationships with lenders who know the system, which can speed up an application. You aren't obliged to use them, and you should still compare. Whatever route you take, the lender will want to see the disclosure document and the franchise agreement.
Can I get a franchise loan with no trading history?
Yes, because the lender looks at the franchise system's record as well as yours. Relevant experience, your deposit and security matter more than your own accounts. A first-time owner joining an established brand is usually easier to finance than the same person opening an independent startup.
What happens if the franchise doesn't perform?
Your loan still needs to be repaid. That's why you should model a slow first year, keep a cash buffer, and read the exit and transfer clauses in the agreement before signing. The ASBFEO can refer disputes to trained mediators and arbitrators.