Buying a Franchise in Australia: Verify Sales Forecasts

A persuasive sales forecast can make a franchise look like a safe purchase. But a spreadsheet is not evidence that your business will achieve those results. Before joining Australia’s franchising community, establish where every important figure comes from, whether comparable businesses support it and what has been left out. This guide focuses on checking sales and earnings claims before you sign.

1. Separate recorded results from predictions

Start by asking the franchisor to label every financial figure provided during recruitment. Distinguish between actual results from an operating outlet, an average across several businesses, a forecast for your proposed business and an illustrative example.

These categories are not interchangeable. A mature outlet’s recorded turnover does not establish what a new location will sell during its first year. Likewise, a worked example showing possible earnings is not proof that any franchisee has achieved them.

For each important claim, ask:

• What period does the figure cover?
• Is it turnover, gross profit, operating profit or money available to the owner?
• Does it include or exclude GST?
• Which outlets contributed to the calculation?
• Are the figures drawn from accounting records, point-of-sale reports or estimates?
• Who prepared the information, and has anyone independently checked it?

Keep copies of presentations, emails and spreadsheets, including their dates. If a representative makes an important verbal claim, send a written summary and ask them to confirm or correct it. Evidence should not depend on your memory of a recruitment meeting.

2. Check whether the comparisons fit your business

An accurate number can still be a poor guide to your proposed purchase. Ask why the comparison businesses are relevant to your location, operating model and opening schedule.

A shopping-centre kiosk, a suburban shop and a mobile service business can have very different sales patterns, even under the same brand. Differences in local competition, customer access, trading hours and business maturity can materially affect results.

Request the number of businesses behind any average and the range of outcomes. Ask whether the sample includes new outlets, closed businesses and lower-performing locations, or only established businesses still trading. A headline average may conceal substantial variation or exclude unsuccessful operations.

Where company-operated outlets are used, check whether their reported costs reflect the royalties, management responsibilities and other charges you would face as a franchisee.

For an existing franchise purchase, ask your accountant to reconcile the seller’s reported sales against appropriate supporting records, such as sales reports, business activity statements and bank receipts. Timing differences and different accounting treatments need explanation; they do not automatically indicate wrongdoing. Access may require confidentiality arrangements and removal of personal customer information.

3. Rebuild the forecast from local evidence

Rather than simply reducing the franchisor’s headline forecast by an arbitrary percentage, identify the activities needed to generate it.

For a retail business, sales might depend on customer visits, conversion rates and average transaction value. For a service franchise, they might depend on enquiries, booking rates, completed jobs and average invoice value.

Ask your accountant to build a simple monthly model using those drivers. Then test whether the assumptions are practical:

• Can the proposed staffing and equipment handle the assumed customer volume?
• Is there evidence for local demand at the proposed prices?
• Does the forecast allow for quieter months and the opening ramp-up?
• Are discounts, cancellations, refunds and customer non-payment treated realistically?
• Does the owner need to work substantial unpaid hours to achieve the stated profit?

Separate turnover from owner earnings. Strong sales can coexist with weak profits once wages, occupancy costs, royalties and other operating expenses are included. Clarify whether any quoted profit deducts a commercial wage for the owner’s work, interest and depreciation.

Record a supported case and a weaker-demand case. The purpose is not to predict the future precisely, but to expose which assumptions determine whether the purchase remains attractive.

4. Understand the legal protection—and its limits

Australia’s mandatory Franchising Code of Conduct operates under the Competition and Consumer Act 2010. A new Code commenced on 1 April 2025, with some further requirements applying from 1 November 2025. Ask your franchise lawyer which provisions apply to your proposed agreement.

The Code regulates disclosure, including the treatment of earnings information provided to prospective franchisees. Franchisors do not have to supply a sales forecast. Where financial claims are supplied, have your lawyer check that the required disclosure treatment has been followed.

The Australian Consumer Law also prohibits misleading or deceptive conduct. Representations about future matters, including forecasts, must have reasonable grounds. Calling figures “indicative” does not automatically excuse a misleading presentation, although the full context matters.

Neither legal protection nor a Franchise Disclosure Register listing guarantees financial success. Before committing, ask your advisers to identify unsupported claims, unresolved inconsistencies and assumptions that need written clarification.

Practical takeaway: Do not buy on a headline earnings figure. Trace the evidence, test local assumptions and make your decision using a forecast your independent accountant can explain.