Know the Players: Key Parties in a Franchise Transaction

The decision to buy or start a franchise — or in fact any business — is a significant one. Sometimes that decision may seem simpler with a franchise because the information can be more polished and the roadmap easier to follow.

It pays to remember, however, that the objectives and motivations of all the transaction parties are different. Understanding who the different players are, what they bring to the transaction (and what they take from it) can help you navigate the process with confidence.

Franchisors

In general, franchisors want to build their network and grow their brand — increasing revenue and reach by bringing in good franchisees who will gel with the franchise values and run their businesses in line with franchise standards.

That said, the franchisor is still trying to “sell” you a franchise — to convince you to invest your capital and energy into their brand. Whenever anybody is trying to sell you something, it would be rare for them to put your interests ahead of their own. This doesn’t make them bad or unscrupulous, but it’s something important to keep in mind no matter what you’re buying.

Accountants

Analysing the financials of an existing business, or preparing quality financial forecasts, can be time-consuming and exhausting. It can also be easy to miss things if you don’t know to look for them.

When people avoid using an accountant, it’s often due to cost, or because they think they don’t need one until the business is up and running. The truth is probably the complete opposite. Accountants can assist with things like company setup and trust structures for tax efficiency, but more importantly, a good accountant will save you time and money just by knowing what they’re looking for and being a trusted second pair of eyes.

An accountant may well be your cheapest insurance against making some potentially expensive mistakes.

Lawyers

Lawyers are perhaps the most tightly regulated of the parties involved in any transaction, adhering to a broad range of regulations and codes of practice.

A common trap: feeling reassured because a lawyer is involved, only to discover that lawyer is being paid for by some other party — the business seller, the franchisor, or someone else. Don’t fall into this. Involving a lawyer in a major transaction is generally a good idea, so long as they’re experienced in the type of work you’re asking for — and so long as they’re working for you.

Remember, lawyers are creatures of specific expertise, so make sure you choose one experienced in business sales and commercial contracts.

Key takeaway: It’s great to have a lawyer involved — but make sure they’re working for you, not the franchisor or the seller. Independent legal advice is one of the best investments you can make.

Business Brokers

If you’re purchasing a franchise through a business broker, it’s easy to feel they might be a neutral party, simply sharing information and facilitating a transaction. In practice, most business brokers only get paid when they sell a business — their primary objective is to secure the sale.

This doesn’t always mean they’re siding with the vendor. There may be situations where the broker helps the vendor temper unrealistic expectations or guides the parties to a compromise on sticking points. But remember — a broker may have many potential purchasers for each seller, so if forced to choose, expect them to put the seller’s needs first.

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Finance Brokers

A finance broker’s role is to match your requirements to the right lender (or lenders). This generally means obtaining the finance you need with market-competitive terms and rates.

Most finance brokers get paid by the lender when you take out a loan, with the costs included in your repayments in some way. This doesn’t necessarily mean you pay more for using a broker, as lenders tend to adjust their rates for broker-introduced deals.

Brokers are incentivised to ensure you get an approval — but make sure you use a reputable broker that specialises in commercial lending and that you clearly understand any finance the broker arranges. You may also want to ask which lenders they intend to submit the deal to, as credit enquiries from multiple lenders may negatively impact your credit score.

Lenders

The role of the lender is to lend money — but unlike a broker, a lender’s primary motivation is to ensure you can and will repay the loan. This means the lender needs to understand who you are as an applicant and assure themselves that your business venture has a reasonable chance of success.

When it comes to lenders, look for one that understands franchising — or even better, the particular franchise network you’re looking at.

Tip: A lender who understands franchising will know what to look for — and what to look past. They can often move faster and with more confidence than a generalist lender unfamiliar with how franchise businesses work.

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Your Role

As you may have already realised, your role in the transaction is far from passive. The setup or purchase of your business is a project distinct from your role running the business. It’s the mountain you need to climb to reach the green pastures beyond.

So what’s your job?

• Identify the right franchise — one that aligns to your skills, interests, financial capacity, and lifestyle goals. Your motivation might be ROI, work-life balance, or something else entirely, but getting clear on your own motivation is a great place to start.
• Seek professional advice — particularly in areas outside your core skillset. Pay attention to what those advisors tell you, but don’t blindly follow advice either. Consider it critically as one part of the overall picture.
• Do your homework — the bare minimum isn’t in the recipe for success. Ask questions of everybody, and if you’re unsure or don’t understand something, ask again or ask someone else.

The bottom line: Nobody in the transaction will care about your interests as much as you do. Understand what motivates each party, seek independent advice, and never be afraid to ask questions — even the ones that feel uncomfortable.

Success in franchising depends not only on choosing the right business but also on understanding the key players involved in the transaction. By recognising their roles and motivations, you can make informed decisions and avoid potential pitfalls. With the right knowledge and support, you can confidently embark on your franchise journey and build a thriving business.