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What About Finance?

What About Finance?

One of the sticking points I see again and again with my customers is finance. Building a new store takes capital and most small businesses do not have the spare cash to pay for a store fitout upfront or are seeking a tax effective solution when funding depreciating assets. The finance option you choose will be based on your financial position and what is right for your business.

As a small business owner, the finances of your business are usually quite closely linked to your own finances. It is common for first time business to be financed by personal capital or personal loans. This allows you to open the doors on your first business but also puts you at a high financial risk if your assets or home are tied to the performance of the business. As your business grows and you open more stores, this problem repeats itself as you need to find capital to open new stores.

I met up with Dane Nicholson from HSS Finance and Xavier Gene from Econex Consulting  to discuss the different finance options available for Hospitality businesses. Understanding your options and when you need to apply for finance will avoid delays in opening your new store.

Commercial Lending

One option for financing your new store is to go to the bank. I have found this is often the first option my clients consider. However, it is generally secured against your personal assets and you cannot be guaranteed that your application for finance will be successful. Your ability to access finance will depend on the risk to the financier. Opening a new hospitality business is considered a high risk for the banks. Because there are more hospitality businesses who open each year to the number that survives, it can be a challenge to convince the bank that your business is a good investment. This is particularly difficult for first time business without a track record of success.

Xavier from Econex Consulting clarified why this is the case. Financing a store fit out is not creating a saleable asset in the same way as building a house. If you borrow $200,000 for a fit out, it is difficult for the bank to recoup this money if you default on the loan. The bank is more comfortable financing assets which have a clear resale value. Usually the bank will ask for other property or assets as security against the loan.

Applying for a commercial loan can be more straight forward for established business and franchises who have a track record of success and can demonstrate to the banks that they have proven systems behind what they do. Even in these cases the application is in the name of the business owner or franchises and specific to the individual site. Working with an experienced finance consultant will allow you to include all the information you need to have your finance application assessed.

Operating Lease Agreement

Because it is notoriously difficult to get commercial loans approved for the hospitality industry, there are a number of other finance options that have been created to fill the gap. A popular choice for hospitality businesses is an Operating lease Agreement.

Operating lease agreements are most commonly used for equipment and furniture. However, some financiers will be willing to cover other areas of your fitout including stainless steel and joinery. Unlike a commercial loan, which is a set dollar amount, an operating lease agreement relates to specific assets.

Dane from HSS finance summarized the basics of an operating lease agreement.

“With a rental agreement, the financier maintains ownership of the equipment, assets or furniture, similar to a secured loan from the Bank. The key advantages to this however include the ability to claim back GST on the payments in each BAS lodgement and claim up to 100% tax deduction on the total payment compared to a Bank loan whereby the interest component is only tax deductible. It also doesn’t secure your personal assets. Essentially this allows you to choose the equipment to want and, rather than purchasing it outright, pay for the use of the equipment as a regular payment. There is usually a term for the agreement and an ability to purchase the assets from the financier and take ownership of the goods.”

The advantage some business owners find with this form of finance is it allows you to keep your capital to get the new store up and running. With some lenders, you may not need to provide a security deposit as you would for commercial lending. This allows you to open the new store and still have the cash you need to pay for wages and suppliers during the first twelve months, which is usually the most challenging time for a new store.

With an operating lease agreement, rather than the bank loaning you money directly, the financier sits in the middle and absorbs the risk. Typically this form of finance does have a higher repayment than a bank loan however has more flexibility and can have tax benefits.

Chattel Mortgage

Another form of finance that may be worth considering is Chattel Mortgage. With chattel mortgage, you select the equipment and furniture that you want to go into your new store and the financier lends you the money to purchase those items. As with a lease agreement, the chattel mortgage is linked to set assets rather than a dollar amount.

The key difference with Chattel Mortgage over a lease Agreement is that you take ownership over the assets. This allows you to claim depreciation and has some tax advantages. Typically, the upfront payment will be cheaper than equipment finance but you lose some of the flexibility as you will be locked into a fixed term contract.

What Do I Need to Apply for Finance?

Finance applications for loans from the big banks are the most thorough, and must contain enough information to allow the banks to assess their level of risk. You may choose to make this application directly to the bank or go through a finance broker or consultant who can assist you with the application process.

As a general guide, your application should demonstrate the experience of the business owner in the hospitality industry and your financial position. The financier or bank is looking to assess their level of risk, make sure the business is viable and that you have enough cash in the bank to support the business through initial setup.

Xavier from Econex Consulting summarized what usually needs to go into a finance application. “If you are making an application to the bank, they will usually want to look at your business plan, financial plan and cash flow forecast for the business. To determine your financial position, you may need to provide your tax records, bank statements and statement of position. You will also to need to show evidence of your contribution and security.”

In your application you will also need to include a heads of agreement for your lease and site information. The location of your site is important to the bank in determining the viability of the business and your lease also contains key information round your lease period and lease amount.

For a lease agreement, the process is usually less rigorous. To start looking at finance, you will need two things: a site and indicative pricing. You will need to demonstrate your experience in the hospitality industry and your current financial position. What the financier is looking to see is that the business is viable. You will still need to demonstrate that you have cash in the bank sufficient to run the business and pay for any parts of the store fitout that do not qualify for finance as part of the lease agreement.

Before you can get finance approved on a rental agreement, you need a breakdown of the equipment costs and the other parts of your building cost that you are looking to finance. There will be elements of your fitout that won’t qualify for equipment finance. It is usually straightforward to finance equipment, steel benches and canopies. Trying to get equipment finance on things like plumbing and electrical is much more challenging. With a breakdown of costs, your financier will be easily able to tell you what he can and can’t finance.

When Should I Apply for Finance?

Timing for finance can be tricky. You will need to have finance approved before your shopfitter can start on site. However, before you can have a finance application approved, you will first need to give your financier a signed heads of agreement for your lease and a breakdown of your fitout costs.

This means that typically you cannot get finance finalised until your shopfitter gives you an itemised quote for your new store fitout. This is usually just weeks before you are wanting to start on site, any delays with finance approvals at this point will push back your store opening as you may be waiting on finance to pay your shopfitter’s deposit.

What is the solution? You can work with your shopfitter and designer to put together an equipment list and budget estimate much earlier in the design process. This budget estimate will only be indicative for your building costs and services. However, it should be quite accurate for your equipment. Your shopfitter should be able to give you an estimate for things like stainless steel benches and canopy. The financier can then sit down with you and look at the indicative costs for opening the new store and how much cash you have in the business.

This initial conversation should give you clarity on the amount you are likely to be able to finance. Starting this conversation early will also make sure you have everything your financier will need to approve the finance. Once you have the final itemised quotes through from your shopfitter, you can then sit down with your financier to run through the costings and finalise your finance approval.

How is the Finance Process Different for Franchising?

Finance applications for franchise stores follow the same general process as detailed above. The key difference is the backing of the franchise does help with your assessment of risk to the financier. In a franchise system, the lender has the confidence that the business will have systems in place, and have head office support for training. There is a level of credibility associated with recognised franchise brands that the operator knows what they are doing and will have vetted their franchisees.

For Franchise brands, the finance applications are still in the name of the franchisee. The franchisor should be able to provide more detailed information about the store costings and cash forecast for the store, however, the financier will look at each site individually as well as each applicant. Some financiers have agreements with particular franchises. However, the franchisee will need to demonstrate their financial position and viability before they will have the finance approved.




Are You Ready To Open New Stores?

Brian Keen from How to Franchise Simply talks to Renew Design and shares three decades experience working within the franchise industry. We discussed a simple strategy to set your business up for growth.0aeebbc

There are a handful of key ingredients that must be in place before a business is ready to expand. When a business owner first looks at expanding the business, they need to look closely at whether they have the right ingredients to open a new store.

The first one is the demand for the product. You have to make sure that there are enough customers who are hungry to buy your product. Secondly, you have to make sure that the business is profitable. A lot of people go out to franchise because they’re desperate to grow and they can’t grow their existing business because it’s not profitable enough. This should be a warning signal. Lastly, once you know there is a demand for your product and that you can sell your product at a profit, you have to know your business model can handle volume.

Preparing your business for expansion is a process of refining your existing business model. As you move through the stages, you will define and clarify your ideas.

  1. Firstly, you have to design the concept of your business. This is your brand messaging, customer experience, marketing strategy and your organizational chart.
  2. Then you need to define your business model a bit more by developing budgets and your territories.
  3. Once you have a clear understanding of your business model and figures, you can develop the detail of your operations manuals and store style guides.
  4. Finally, you are ready to deploy and open new stores.

Develop the Concept for Your Business

Expanding the business is basically taking what you have done and learnt and starting from scratch and saying;

“How will I change this?”

“What will it be like now?”

You may find you need to eliminate some things because they are not profitable. When you expand, keep it really simple. Most successful businesses that grow have a simple flow to them. Break it down to the minimum.

To simplify the operations of your business, start by putting an organization strategy in place. Usually in a small business, the business owner will be wearing several different hats. Before the business is ready to expand, you need to break it down into different segments. For instance, they may be administration, marketing, sales, production, and so on. You then need to describe very simply what those roles are and then list down the key five or six tasks under each one.

Breaking the business down and understanding the key tasks will form the beginning of the operations and procedures manuals. However, before you sit down and write your operations and procedures manuals you need to make sure everything works as effectively as possible.

Define Your Business Model

Once you have simplified your business model, the next thing you need to do is test your business model. Really look at the processes and expenses for your new store and how this will differ in the new stores to your existing store. Consider store setup costs, suppliers, wages and overheads. Allow for an additional marketing and advertising budget for each store.

For store setup costs, some of those figures won’t be viable when you are doing your preliminary budgets and you will need to revisit them later. Budgets for store fit out will vary for different sites however you should start with a realistic budget figure and refine this as you develop your business model.

Who are your customers? The key thing that most people overlook when opening a second store is understanding the demographics of the area in which you are opening. You need to do some research on the demographics, on the statistics, find out about the profile of the customer you are looking to attract.

There is an idea that is often used in marketing called your avatar.  Your avatar is your ideal customer. Profiling your ideal customers before you set up another store allows to look at the demographics in the new area and see how many of your target customers are in the area around your new store. Understanding who your customer is helps you to define your brand messaging and create the experience you want to offer to your customers. This will affect your marketing messages, the language you use to talk to your customers, and the look and feel of your stores.

Develop an Operational Strategy

Once you have defined your business model and customer, you are ready to document your operations manuals. The purpose of your operations manual is to allow you to communicate and train your staff in the operations of your business.  You will usually need two types of manuals, comprehensive training manuals and quick reference checklists.

In Franchising, it is pretty much accepted that you need to open a pilot store when you open your first franchise.  When you open your first business you still have things to fine tune. You need to test your store design and operational systems with staff. You need to see what works and pressure test your systems to find the holes and the things that you have overlooked.

Open New Stores

In the first few months of opening your new store you will be testing and modifying things. You will test the manuals, equipment, layout and business model to make sure it works as effectively as possible. When you open new stores, you need people who can assume significant responsibility, these may be managers or franchisees. You want them to step up to the mark, not because you’re paying them but because they love being involved with your business.

When you have opened your second store, you need to treat it like a newborn baby. What I mean is, monitor it very, very closely. Bad habits set in quickly, and having a system for monitoring the performance of the business will allow you to have the peace of mind everything is on track.

Expanding your business and opening new stores can be rewarding. Asking the right questions and planning in advance will help to keep the process simple.

Just Opened: Beefy’s Pies Mango Hill

Since opening their first store in the Sunshine Coast in 1997, Beefy’s commitment to creating award winning pies and connection with the local community has seen the business thrive. Last month, Beefy’s opened their eight store in Mango Hill  with a fresh design inspired by the history of the brand.


Taken during the construction of the new Beefy’s store.

Designing the new store was not just about selecting colours for the walls, rather it was uncovering what works for the existing stores and creating a new store design that tied into the existing brand. Renew Design worked with Beefy’s Managing Director Mark Hobbs to define the experience Beefy’s create for their customers. Rather than starting with a blank canvas, we looked at the tradition and values of the brand to define what Beefy’s were already offering to their customers to make the stores a success.


The new Beefy’s store in Mango Hill.

The Beefy’s experience is first and foremost about enjoying a great pie. The idea of the pie is the subtle inspiration for many elements of the fitout. From the detailing of the entry to the warm timbers, the experience is designed to feel warm and homely. Quirky touches with a sense of humour  include the “ floating pie” lights above the shared tables.  The inspiration for the detailing of the new store interior came directly from the product.


Since opening their first store, Beefy’s have built strong connections to the local community. Regularly sponsoring local sports teams, schools and charities the stores are local in the way the operate at every level. Each of the Beefy’s stores are family-owned and operated and this sense of family extends to staff and customers. Supporting local charities and events is a big part of what allows Beefy’s to connect with their local community. This was something we wanted to convey in store to make it visible to customers

The new store sees a fresh take on the experience of visiting a Beefy’s store and the friendly welcome and first delicious bight of a Beefy’s pie as as good as ever.


Elizabeth Gillam on Food Franchising

A couple of weeks ago I sat down over a cup of tea and asked Elizabeth Gillam from Franchisee Success to share some of the insights she has gathered from ten years in Food Franchising. Liz bought her first Boost Franchise in 2004 and has gone on to open a Health Habits Franchise and Bucking Bull Carvery. I asked her to share some of her experiences starting out in Franchising and the keys that a business must have in place before they are ready to franchise and open new stores.

The Brand Story

Your need to communicate the value franchisees are getting upfront. Before you franchise a concept, you have to not only have a business model that shows profit but also you have to have a brand story. That is what people are paying for, you can’t just sell a dream.

“When I start working with business who are wanting to franchise, I ask, so what is your franchise model going to be?  We go through what their goals and aspirations are, what they feel they have to franchise and what their point of difference will be. Why is somebody going to buy a franchise over setting up a business on their own? They must be able to define what they will bring to the franchisee.”

The stores need to look similar and communicate the same story to the customer. When you are selling a franchise, you are selling not only your operations manuals but also the story behind your customer experience and brand.

Business Systems and a Leadership Team

To expand your business and open more stores you first need to free your time from the business. This takes an initial investment of time to record and systematise your business systems and test these systems with your leadership team. If you don’t have a leadership team in place your stores are not autonomous.

“You have to know your business inside out and upside down, what works, what doesn’t. You will need to systematise what you do and what makes you successful and then test that. The only way to do that is to put a leadership team in place that is running under those systems.”

In franchising, you are asking for a premium because your business is systematised. What is the system your franchisees will be buying?

The Pilot Store

In Franchising, you are selling a product, that product is your brand, store design and business systems. Setting up a company-owned pilot store will allow you to prove your business model and store design. You must come to the Franchisee knowing exactly what your product is. By the time you are opening stores for Franchisees, your time of trialling is gone.

“Your pilot store must be running at around 20% profit because by the time you franchise and lay out for marketing there must still be enough profit in each store that someone sees the value of investing in them.”

Elizabeth shares more insights into food franchising and tips for franchisees to increase profitability in her book  “Upsize Your Profit”. 

Creating Consistency in the Look and Feel of Your Stores

Expanding your business is no easy feat. In fact, growing a business and duplicating your success form one store to many is a challenge that many business owners struggle to master. If you are a franchisor or business owner I’m sure you will agree. Working with business owners who have five stores or fifty stores I have noticed that some of the challenges and objectives are the same.

  1. Firstly franchisors want to have a strong and recognisable brand image and a constant look and feel across all of their stores.
  2. Secondly franchisors want the look and feel of the stores to remain fresh and appeal to their target customers.
  3. Finally (and this is the big one) every business owner wants a point of difference, something that creates a “wow” moment for their customer or is memorable enough to make the customer come back.

Let’s talk first about creating consistency. Have you noticed how the brands that we all recognise as household names all have a signature look and feel? Take McDonalds for instance, their stores follow the same colour scheme, red and yellow. You can globe-trot all you want but you still won’t see a single McDonalds store with pink and blue walls.

The secret to creating your signature style and achieving consistency across your stores is to create a design strategy before you get to far along the road to growing the business. The Design strategy will detail the branding, interior design, colour scheme and store layout as well as the “big picture” vision for the business. Having a strategy for not only the initial design but also the store refits is important in creating consistence.

The ability of a store to attract customers directly affects the profitability of the business both for the franchisee and the franchisor.To keep your brand fresh and maintain your customer appeal it is important that this design strategy isn’t just prepared once and then left on the shelf.

Working ongoing every year or two at most with an experienced designer to review your current brand and set a new direction for future stores and refits keeps your brand alive and ahead of market trends. More importantly it keeps things fresh and interesting for your customers.

Finally, creating your point of difference and that “wow” customer experience. There are no rules for this. I am a firm believer that you are the one who already knows what makes your brand special and unique. It may be a family run pie shop that makes every customer feel like they are part of the family. If may be a café that serves up a little slice of Europe to their clientele. Whatever your point of difference is, I believe it is already there you just need to work with the right people to uncover and create it.

How Remarkable Design Can Help Your Business Grow

Business owners who are looking into expanding their hospitality business should start thinking more of the benefits a remarkable design could provide them. Artistry, as shown in the unique interiors and beautifully painted walls of multiple retail stores and franchises has become one of the growing trends today. Clearly, design correlates to the success of the hospitality business.

Dynamic Team Play

Business expansion entails a lot of hard work and collective efforts from a team of individuals with a unique set of skills and expertise. You will need the help of a financial analyst to manage your finances; a lawyer for the legal framework and franchise documents; an interior designer for the aesthetics and documentation of the concept design; and builders for the actual construction and fit out process.

The Power of Aesthetics

We cannot deny the fact that beauty has a way of attracting people. This also applies to newly opened branches of your hospitality business or retail and franchise stores. The more your store exudes beauty and uniqueness, the more people will be attracted to it. This basically means more income for you.

What I’m trying to say is, if you create a store that is attractive to the naked eye, chances are, you will attract more prospective customers to visit your place, and actually try the products and services you offer.

Work with an Interior Designer

Working with an experienced interior designer is beneficial to your growing business. Delegating the task of embellishing your otherwise plain-looking store to someone who actually has an eye for details and design is a smart move.

You can contact our designer, Alisa Newey at 0415 199 466 not only for creative advice, but for other things as well, such as the documentation of the entire process of replicating your success through the opening of new branches of your retails stores and franchises. She can also introduce you to the people who can help you in the expansion of your fast-growing business.

Visualise Your Ideas and Make Them Happen

More often than not, business owners who want to expand their business already have an idea of how they want the new stores to be like, or how they want these stores to operate. They may not necessarily rebrand and adapt a new concept but they do have visual images of how they want their retail stores to be recreated.

It is the job of the interior designer to put this image into reality, and that is why it is important to work with one who will not only put your idea on paper, but will actually help you make your dream store a reality.

Interior design may be an important tool in attracting new customers but this should not jeopardise the efficiency of the store or the establishment. It is still very important to properly utilise the space to maximise your target profit, and this is where the interior designer’s expertise come in really handy.

How Much Does It Cost To Start A Restaurant?

Starting a Restaurant Business

Starting your own business can be a little overwhelming and exciting at the same time. Opening up a small café or restaurant takes careful planning to achieve the plan or goal you have in mind. The first step involves a lot of brainstorming, until you come up with a solid business plan. This is where you decide what you want to achieve and how much you are willing to shell out for your business. That being said, it would be best to figure out how much it would cost you to start a restaurant.

Lease and Tenancy Expenses

First on the long list of expenses would be the rent, assuming that you don’t own the place where you will be opening up your restaurant. The amount of money that you will be spending for the lease agreement would depend on the location and the size of the place that you will be renting. It’s ideal to have at least three options before deciding which location would be best for your business.

Renovation and Interior Design

After you have decided where to open up your business, the next set of expenses that you will incur will be for the renovations and interior design. This includes materials for the renovation, furniture and equipment necessary for the business to be up and running, as well as the labour cost for the experts that you will be hiring to do the renovation and the interior design.

You may ask, is this really necessary? As a matter of fact, yes. Most often than not, aesthetics can affect your business. Beautiful interiors tend to attract more customers as compared to those that are not.

Feel free to contact our designer, Alisa, on 0415 199 466 for some creative advice to get you started. She can help you decide what concept, design or style would work best for the restaurant that you are looking into opening, and she can also help you document the entire process for future references.

Build your Restaurant Staff

As soon as you have finished renovating the place and making it aesthetically attractive to the naked eye, you can start managing your finances to cover the expenses for the restaurant staff that you need to hire. The basics would include a chef, an assistant, the waiting staff, dish washer, cashier, and other relevant positions that need to be filled with qualified candidates.

How many people do you need to keep the daily operations running smoothly? How much will they be earning? What are their responsibilities? What is the sitting capacity of your restaurant and how many waiting staff do you need to cover this? These are just some of the things that you need to think about.

Stock up and Start Serving

After you have successfully sorted out the finances that you will be shelling out for the restaurant staff, you can now begin to set aside the money for the restaurant stock. This means that you will have to decide when to stock and restock. Think about how much you need to spend for the ingredients so you can start stocking up and serving your customers with dishes that will make them crave for more.

Advertise and Market your Restaurant

As soon as you have everything you need to open up your new business, you can probably spend a couple extra bucks for some decent ads and fliers to give your business some exposure and let your customers know that you’re ready to serve them. To save money, you can also make use of social media platforms to reach out to your target market.

If you need some help, don’t hesitate to call our designer, Alisa, on 0415 199 466 so she can introduce you to the right people.