STRONG SYSTEMS SUPPORT FUNDING

Buying, growing, refurbishing, or selling a franchise business can be one of the most powerful ways to build long-term value. However, securing the right funding – and structuring it correctly – plays a critical role in determining whether a franchise thrives or struggles. 

Franchising often presents a lower risk proposition than independent start-ups. Established brands, repeatable systems, and shared operating knowledge provide lenders with greater visibility and predictability.

At Westpac, franchise funding is approached as a specialist form of business lending, designed around cash flow, franchise systems, and the full lifecycle of a franchise business. Our approach might differ depending on whether we are being asked to fund smaller service franchises with income guarantees or a larger investment business with high set-up costs.

Below are a few suggestions for how franchisors may be able to assist you with the funding application process, especially with a new set-up.

System consistency and benchmarks

Franchise systems that demonstrate strong governance, proven unit economics, and effective franchisee support are often easier to fund than standalone businesses. Lenders place significant value on system consistency, reliable trading performance, and the ability of the franchisor to support operators through different trading conditions.

For new franchisees, the transition from employment into business ownership can be more achievable, as lenders are able to consider system benchmarks and operating data, rather than relying solely on individual experience.

What the franchisor can do: Provide realistic, evidence based financial benchmarks and maintain consistent system performance across the network.

Looking beyond the purchase price

After the initial investment, franchisees may eventually require funding for business set-up or acquisition, fit out, vehicles, and equipment; working capital during the ramp up phase; refurbishments and brand re-imaging; expansion into additional sites; and resale or exit transactions.

At Westpac, funding discussions are framed around the entire franchise lifecycle, ensuring finance solutions evolve as the business does.

What the franchisor can do: Clearly outline lifecycle capital requirements – particularly refurbishment and reinvestment expectations – so franchisees can plan ahead.

Knowing what banks look for

When funding a franchise, banks look beyond the individual operator. Key considerations include: strength and sustainability of the franchise system; historical performance of comparable franchise unit; training, governance, and ongoing franchisor support; stability of the brand and wider network; and the franchisee’s equity contribution, experience, and financial discipline.

Cash flow remains central. Lending decisions look at the business’s ability to service debt through normal trading conditions, not just best-case forecasts.

What the franchisor can do: Maintain strong system discipline, robust training, and transparent reporting to support lender confidence.

Deep system understanding

Effective franchise funding requires more than reviewing a set of financial statements. Westpac works closely with many franchisors to understand how their systems operate in practice, including seasonal sales pattern, labour and occupancy cost sensitivities, and system-specific drivers of performance.

This understanding allows funding to be structured around how the business actually trades. Generic assumptions may not reflect reality.

What the franchisor can do: Communicate changes to the operating model, cost structure, or system strategy early and clearly.

Supporting resales and growth

A significant proportion of franchise lending relates to resales and multi-unit expansion for franchisees exiting or growing a business. Well run systems benefit from clearer resale pathways, consistent valuation approaches, and smoother transitions between operators. For experienced franchisees, this can also support expansion into additional territories, portfolio level funding structures, faster, and more predictable approval processes.

What the franchisor can do: Actively support resales with transparent financial information and hands on involvement throughout the transition.

Protecting long-term system value

Sustainable funding supports sustainable franchise systems. Well-structured lending helps ensure healthy franchisee cash flow, ongoing reinvestment in the network and consistent system standards and brand strength.

Conversely, poorly structured or overly aggressive funding can place unnecessary strain on otherwise sound businesses. In one recent example a multi-site franchisee attributed their failure to the wrong funding structure, unsuitable funding products, and expensive second-tier funding – highlighting how critical these decisions can be.

What the franchisor can do: Encourage responsible borrowing and discourage short term funding solutions that undermine long term viability.

Understanding franchisee funding needs

Most franchise businesses require a combination of maintenance and refurbishment funding, expansion capital, tailored lending solutions aligned to cash flow, equipment and asset finance, and transactional banking and payment solutions, including merchant services.

An integrated banking approach helps align funding with operational realities, rather than forcing businesses into ill-fitting structures.

What the franchisor can do: Standardise fit-out scopes and asset requirements to improve funding consistency and efficiency.

Structuring the finance correctly

The structure of finance is often more important than the interest rate. Repayment terms, product selection, and the alignment between asset life and loan term all have a direct impact on cash flow.

An inappropriate structure – such as aggressive repayments on long life assets – can quickly create pressure, even in otherwise profitable businesses. Franchisees should always involve their accountant and business banker early to ensure funding supports, rather than constrains, performance.

What the franchisor can do: Promote early engagement with specialist advisers and reinforce the importance of sustainable funding structures.

Speeding up funding approval

Prospective or existing franchisees can materially improve approval timelines by using a franchise-experienced accountant to help prepare the following information before approaching the bank for funding:

• Clear details of how much funding is required, when needed, and what for
• Up-to-date financial statements and credible forecasts, aligned to system benchmarks
• Clearly explained equity, security position, and repayment capacity

Systems that support franchisees through this process see better, faster funding approval and long-term outcomes.

What the franchisor can do: Provide lender-ready documentation, benchmark data, and finance readiness support to new and existing franchisees.  

Daniel Cloete is Westpac's National Manager Franchise and Business Partnerships. Contact the Westpac Franchise Team on 0800 177 007 or Email: franchising@westpac.co.nz 

See this advertorial on page 9 of Franchise New Zealand magazine Year 35 Issue 02

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The information contained in this article is intended as a guide only and is not intended as an exhaustive list of matters to be considered. Persons entering into franchise agreements should seek their own professional legal, accounting and other advice.