Buying a Newsagency Franchise — What’s Involved?
As you pop into the corner store to grab a newspaper or perhaps a lottery ticket, you might wonder what it would be like to run a business like this yourself.
Of course, you also might wonder if such stores are bound to disappear with the changing news media market and explosion of online shopping.
But through evolution of their own, newsagencies have remained a strong investment in Australia and offer you a great opportunity to go into business for yourself, especially if you enjoy the constant interaction with your customers.
Options for Owning a Newsagency
Before you jump at the chance to get into the newsagency business, you’ll want to consider the variety of options for owning your own store:
- Start from scratch: Maybe you’ve noticed that empty storefront along a busy boulevard in your neighbourhood and thought it would be the ideal location for a newsagency. You’ll need to tackle a multitude of tasks to start a store from scratch, ranging from finding local newspapers and magazines to sell, registering with the state lottery to serve as a vendor, purchasing a point-of-sale system, setting up attractive displays and signage, finding vendors for the type of stock you’d need to carry and on and on. You’ll probably need several months to jump through all the hoops before you’ll be ready to open your doors.
- Buy an existing newsagency: Buying an existing newsagency is a great option if you have the cash or have access to a business loan. Prices can vary from as little as $60,000 in certain neighbourhoods to upward of $1 million in a city-centre shopping district. You’ll want to understand the financials to determine if it’s already a well-run store that can continue to support your family along with any borrowing costs you may assume, or if it’s in a great location but has been poorly run, so you can put your own stamp on it and improve the financials, or maybe it has all the fixtures, inventory and POS but just needs to be relocated to a better site, a task you’d be willing to tackle.
- Invest in a franchise: Though only about 1 per cent of newsagencies in Australia are franchises, they do come with all of the support that could help a new business owner get through those struggles in the early days. Besides the well-known brand name, you’ll get access to initial business operations training, established marketing and loyalty services, help negotiating a lease, expertise in fitting your displays into the existing space, the buying power of a larger company and more.
For the remainder of this post, we’ll talk about the steps involved in opening a franchise newsagency, with much of the information also applicable if you’d prefer to start on your own or buy an existing newsagency.
Factors Involved in Launching a Franchise Newsagency
These are some of the factors you will need to consider as you look into a franchise newsagency:
- Availability: The two primary newsagency franchises operating in Australia are Supanews, which is owned now by British retail conglomerate WHSmith and offers franchises in Queensland, New South Wales and Australian Capital Territory; and The Lucky Charm, a family-owned Australian company that began with a single store in 2001 but now has 47 franchises across the country. Both agencies require an application process whereby your potential location and finances must be reviewed before you’ll be accepted. Other brands you might recognise, such as Newspower, News Extra, newsXpress and Nextra, are actually marketing groups, which can give you the name recognition, marketing services and shared buying power of a franchise, but with less extensive training and help setting up a new shop.
- Offerings: Both franchise companies offer new business owners training in business operations and help you determine the types of products you’ll need to carry to succeed in your chosen location. As you look around your favourite newsagency, you probably realize news has become a small part of the business — an IBISWorld survey in 2015 showed only 10 per cent of newsagency business comes from newspaper sales. The greatest percentage, 25 per cent, comes from gifts, cards and party items, with another 20 per cent coming from lottery and magazine sales. Franchise stores will have direct access to suppliers with the greater buying power than an individual store. You’ll also receive marketing services and data analysis that helps you determine what products serve your customers best.
- Cost: Franchising costs will vary by location and level of business, but Supanews reports an average cost for a start-up, 150 sqm store to be around $300,000, calculating everything from the franchise fee to legal fees, lottery fees, displays, POS system, rent and deposit. Franchises also pay an ongoing monthly fee, either sales-based or fixed depending upon sales volume, plus marketing costs, etc. But Supanews also reports the average profit margin for its franchises at 52.3 per cent.
Are You Ready to Invest?
With some 4,000 newsagencies operating across Australia boasting turnover of $6 billion, the industry is not likely to disappear soon. Shoppers still prefer the convenience of popping into the neighbourhood store to grab a quick gift or stationery and envelopes to ordering online and waiting a few days for delivery.
As a business owner, you’ll become familiar with the regular and loyal customers and be able to tailor your newsagency to meet their needs. With a franchise or even a marketing group, you won’t have to make those decisions by instinct as you’ll have data from your store as well as your sister stores to spot trends and keep evolving in a positive direction.
As your store grows and you need to meet the needs of a staff, you’ll also want to consider your options for providing a Super fund for your employees. Nationwide Super can help you meet the needs of your employees and yourself as you need to plan for your eventual retirement as well. Contact us today for more information.