Buying a NZ Franchise: Check Who Owns the Equipment

When buying an existing franchise in New Zealand, do not assume everything you see on the premises comes with the purchase. Coffee machines, vehicles, refrigeration units and payment terminals may be leased, financed or owned by someone else. Within the franchising community, a familiar brand does not remove the need to check individual assets. Establishing what you will actually own helps prevent unexpected repayments, replacement costs and disruption after settlement.

1. Turn the equipment list into an ownership record

Ask the seller for a detailed asset schedule before agreeing what the purchase price covers. Descriptions such as “all equipment necessary to operate” leave too much room for disagreement.

For each significant item, record:

• Its description, make, model and serial number, where available.
• Its location and apparent condition.
• The claimed owner and evidence of ownership.
• Whether it is included in the sale price.
• Any finance, lease, hire or maintenance agreement attached to it.

Compare the schedule with a physical inspection. Check that listed items are present and that equipment used daily has not been omitted. Ask specifically about items kept off site, spare equipment and vehicles.

Invoices, purchase contracts and payment records can help establish ownership. An accounting fixed-asset register is useful, but it is not conclusive proof that the seller owns an item free of other claims.

Separate equipment owned by the seller from equipment supplied by the franchisor, landlord or another supplier. A branded display fridge, for example, might belong to a drinks supplier and remain available only while a separate supply arrangement continues.

2. Check security interests, not just unpaid invoices

New Zealand has no franchise-specific legislation, mandatory statutory franchise disclosure regime or franchise registration system. General laws apply instead. The Fair Trading Act 1986 addresses misleading conduct and representations, while the Contract and Commercial Law Act 2017 provides relevant contractual rules and remedies.

For equipment checks, the Personal Property Securities Act 1999 is especially important. It governs security interests in personal property, including many business assets. The Personal Property Securities Register, usually called the PPSR, records registered security interests; it is not an ownership register.

A seller may own equipment but have granted a lender security over it. A lender might also hold security over the seller’s assets generally, rather than over one named machine. Some leasing and retention-of-title arrangements can also fall within this framework.

Ask your lawyer to identify the appropriate PPSR searches, using the seller’s correct legal details and relevant asset identifiers. Have the lawyer interpret the results and determine whether any security interest could affect what you are buying. A clear search alone is not proof of ownership.

Where necessary, arrange for secured creditors to release the purchased assets at settlement. A seller’s promise to repay borrowing later is not a substitute for an effective release.

The Franchise Association of New Zealand’s Code of Practice and Ethics binds its members, but it is not legislation applying to every franchise. Its disclosure requirements do not replace asset-specific due diligence.

3. Confirm that essential agreements can continue

Equipment you will not own can still be essential to the business. Obtain every associated lease, hire agreement and service contract, including schedules showing charges and expiry dates.

Check whether the transaction requires the equipment owner’s consent. You may need an assignment, a new agreement or another documented arrangement before you can use the equipment. Do not assume the seller can simply hand it over.

Ask these practical questions:

• Will the provider accept you as the new customer?
• Will charges, deposits or credit requirements change?
• Who pays for servicing, breakdowns and replacement?
• Can the provider remove the equipment, and in what circumstances?
• Does the arrangement last long enough for your operating plans?

Check software and subscriptions separately. Owning a till or computer does not necessarily transfer its software licence, payment-processing account or access to the franchisor’s systems.

Include continuing equipment payments in your cash-flow forecast. If an agreement cannot transfer, obtain a replacement quote and realistic installation timescale before proceeding.

4. Make the sale agreement match the evidence

Ask your lawyer to attach the agreed asset schedule to the sale and purchase agreement. It should clearly distinguish assets being purchased from third-party items that will remain available under separate arrangements.

Discuss appropriate ownership warranties, required creditor releases and conditions covering essential third-party consents. Identify who bears any settlement costs for financed equipment and how those payments will be handled.

Arrange a final inspection close to settlement. Confirm that the agreed equipment remains on site, matches the schedule and has not been substituted. For expensive or essential machinery, consider an independent condition assessment: ownership checks do not establish reliability.

Practical takeaway: Before committing, give every essential item a documented status: owned and transferable, financed with an agreed release, or third-party equipment with confirmed usage rights. Resolve any gaps before they become your operating problem.