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Mad Mex Franchise Loan

How does a Mad Mex franchise work?

Are you addicted to tacos, quesadillas, burritos and all things tex-mex?

With a Mad Mex franchise loan, you can buy your own Lucha Libre-themed restaurant and fuel your passion. Just don’t eat all the profits!

There are a select few lenders that can help you with finance but how do you qualify and how much can you borrow to realise your dream?

How much can I borrow?

Think of applying for a franchise loan like going for a job interview: you have to put your best forward and tell the lender why you’re the right person for this finance.

The stronger the case you can present, the greater your chance of getting approved.

  • New or existing fresh mex grill: Borrow between 50-70% of the total costs to buy the business or up to 100% with an existing residential property as security.
  • Loan term: Typically 10 years or the length of the franchise agreement.
  • Loan term with property as security: 25 to 30 years.
  • Interest only: Typically 2 years.
  • You’ll need to provide a business plan and profit forecasting along with your application.
  • There are no low doc options on offer.
  • We may be able to negotiate interest rate discounts depending on the strength of your deposit and security.

Some banks and lenders have an approved list of franchises but this list is changing all of the time!

It’s important to speak with a specialist mortgage broker that has strong relationships with business finance arms of the banks.

We can help you to put a strong application together and check to see if they still have the appetite to finance Mad Mex franchise.

Please call us on 1300 889 743 or complete our free assessment form to find out if you’re eligible for a Mad Mex franchise loan.

What do I need to prepare for the application?

How long is a piece of string?

Bank requirements change often in the commercial and business lending space largely because it’s an unregulated part of the market.

The main thing they want to see is that the deal or your situation and what you’re planning to do makes sense.

We can help you with this but there are some fundamentals of your character that can help.

Financial position and credit history

Remember, low doc options aren’t really available with franchise loans so you’ll generally be asked to provide your last 2 years personal tax returns and/or business transaction statements if you’re currently running a similar-size operation.

Being of good character should also mean that your credit file is free of defaults and bankruptcy.

Business experience

It goes without that saying that the lender, and Mad Mex for that matter, would generally like to that you’ve had managerial experience running a similar-sized enterprise in the hospitality industry.

It doesn’t necessarily have to be in the high-end fast food space or in a Quick Service Restaurant (QSR) but your skills should give the lender knowledge that you can stay profitable.

Security and “hurt money”

The bank isn’t going to just fund the full cost of the Mad Mex franchise without you chipping in yourself first. It’s about spreading the risk.

That means you’ll either need a 30-50% deposit. However, you can avoid having to provide a deposit by using equity in an existing residential property instead such as your own home or an investment property.

New vs existing store

For new stores, banks generally have more confidence in approving a Mad Mex franchise loan because they’re relying on business data supplied by Mad Mex showing average revenue estimates.

For existing stores, the bank will want to look at the financials of the current franchisee.

They’ll want to know how the business had been travelling over the past 2-3 years.

You should be doing the same due diligence on your end when inspecting the property. It’s crucial that you enlist the help of a business accountant that can help you run comb through the financials as well.

There is now black and white policy on what the acceptable profitability should be but a general benchmark should be anything above 1.5x earnings before interest, tax, depreciation and amortisation (EBITDA).

If profitability has been dropping but you have a solid plan to turn things around, draft it up with your accountant and present it to the bank – we may still be able to get you approved.

It could be that the restaurant is in a prime location with lots of foot traffic but it’s simply been mismanaged. With your past experience and hiring a manager with long-term experience in the QSR industry, you can make the business successful again.

This is just an example but you get the idea.

Our mortgage brokers are Mad Mex franchise loan specialists so let us help you to build a strong case.

Why should I speak to your mortgage brokers?

Although Mad Mex is an accredited franchise, it doesn’t mean that you’ll automatically get approved for Mad Mex franchise loan.

The bank’s appetite for franchise businesses changes on a very infrequent basis: a store that was accredited 6 months ago may not on the list today.

At the very least, the amount you can borrow or the Loan to Value Ratios (LVRs) offered by lenders can change and much of this has to do with the amount of funds they allocate for particular franchises in any given year.

If they reach that target, you won’t be able to get a franchise business loan with that bank, however, there may be another lender that can help.

We have strong relationships with nearly 40 Australian lenders so we can negotiate strong commercial interest rates and help you to borrow more than you normally would if you were to apply with the bank directly.

Call us on 1300 889 743 or fill in our online enquiry form to speak to a franchise loan specialist today.

How much profit can I stand to make?

Mad Mex will usually give you some estimates based on the store size and location when you sign the franchise agreement. The real question you should be asking though is how hard are you willing to work?

Yes, you’re buying a franchise but it’s still a business so don’t skimp on doing preliminary research local market including demographics and existing competition.

Having a business plan that will help you keep costs down is crucial in sharpening your profit margins, particularly in the early months of running the venture.

Luckily, you’ll have Mad Mex’s franchise system on hand in the form of an operations manual as well as business development managers (BDMs) to leverage knowledge and expertise from.

What are the costs?

There are really two types of costs that you need to take into account: set up and ongoing.

Set up costs

The upfront cost for a Mad Mex franchise is between $375,000 and $450,000 which includes a $45,000 franchise fee, $10,000 for training, shop fit-out, equipment and initial stock and supplies.

As with other franchises, these costs can vary depending on store size and location.

Ongoing costs

  • Royalties: 6% of gross monthly sales (including GST).
  • Marketing: 3% of gross monthly sales (including GST).

How do I apply with Mad Mex?

  • Complete the Mad Mex ‘Short Introduction Form‘.
  • You’ll receive a phone call within 2-3 business days and undertake a short interview where you can ask some more questions about the business.
  • This will be followed by a face-to-face meeting where you may be required to sign a confidentiality agreement.
  • If you’ve gotten adequate legal and financial advice and are comfortable in proceeding, you have the opportunity to sign Mad Mex’s Uniform Franchise Offering Circular (UFOC) or franchise agreement then and there.
  • You’ll need to submit the UFOC and pay a fully refundable application fee of $2,200. This fee will actually go towards the franchise fee.
  • You’ll have a follow-up interview, this time, attended by the director of store development and other senior management. They will run through the business operations and you’ll need to sign some legal documents. Have your lawyer or solicitor attend the meeting to clarify anything you don’t understand.
  • Once the documents are signed, you can look at applying for a Mad Mex franchise loan pre-approval through your mortgage broker.
  • Meanwhile, Mad Mex will find a suitable site and provide you with an offer letter will a summary of upfront and ongoing costs of the franchise system. You’ll need to sign this and pay your deposit, which will go towards your franchise fee.

Will I be trained?

Past experience in hospitality is not essential but it will be looked upon highly in your franchise application.

Experience or not, you will undergo an initial six-week training course at Mad Mex’s Sydney office, supplemented with online videos.

During your store opening and the following two weeks, you also have experience management staff on board showing you the ropes.

So does that mean I actually need to work in the store?

Yes! Most franchise systems require owners to be active in the business at just about every level, from customer service and ordering stock to preparing food and cleaning.

If you’re after a more passive investment, we can help you get a loan to buy a freehold commercial real estate instead.

Do I get to choose the store location?

As mentioned previously, there are two options available to you.

Firstly, you may be offered an existing store that is being sold by a franchisee.

There is opportunity to leverage a store in a good location and a solid reputation but it’s important to speak to the outgoing franchisee about why they’re selling the store. You have the right to do this under full disclosure requirements that Mad Mex must adhere to.

Shaking a bad reputation can be tough!

Secondly, a newly-built store may be offered to you. However, there is another option.

You can apply to choose your own location and, if it’s accepted, you can lock in a right of first refusal and pay a franchise fee security deposit.

Bear in mind, choosing a new site means it will take longer to get your business up-and-running since Mad Mex will have to go through the usual council approval process and draft up lease terms for the property.

What is a UFOC?

A franchisor is legally required to provide a franchise kit or Uniform Franchise Offering Circular (UFOC) before signing you up to buy the franchise.

This will lay out the full costs of purchasing a Mad Mex franchise and even potential revenue. Sometimes these costs are hidden in the detail.

If you’re buying an existing store, it’ll even give you the details of current owners so take the opportunity to find out why they sold the business in the first place.

This should form part of your due diligence process when deciding whether to buy a franchise in the process.

You can request a UFOC by visiting madmex.com.au but it’s essential you seek advice from your accountant, financial and even the skills of a solicitor to look over the franchise agreement before you sign.

Facts about the fast-food industry

Australia’s fastest growing retail categories are fast casual restaurants (gourmet food served quickly) and mexican food. Mad Mex actually hits both of these trends.

The reason is that consumers are becoming more health conscious but still want the convenience of take-away food. Mad Mex is relying heavily on its gourmet food branding, marketing it as a less fatty, sugary and salty alternative.

The other benefit of the take-away food space is that depreciation costs are low. Similarly, the need for heavy expenditure on technology and staff wages is minimal compared to some other franchise systems.

Securing a prime location for your Mad Mex franchise can be tough, though.

Prime locations for fast-food operators are becoming difficult due to high competition. This has pushed rental costs up, making it difficult for new business owners to locate themselves close to customers.

About Mad Mex

Mad Mex are Australian-owned Baja restaurants, complete with Mexican-inspired furniture, fit-out and music.

Apart from mexican cuisine, the restaurants also sell a range of imported beers, tequilas and margaritas so you’ll need to get sorted with a Responsible Service of Alcohol (RSA).

The company was started in 2007 by Californian surfers Clovis and Angela Young, with the first store opening in Darlinghurst in Sydney.

In saying that, the first franchise didn’t actually open its doors until 2009 so it’s still a fairly young franchise system with plenty of opportunities for savvy investors who are willing to put in the hard yards.

Recently it was voted ‘Australia’s Favourite Latin American/Mexican’ restaurant in the 2014 I Love Food Awards by the Lifestyle FOOD Channel.

It’s also the first QSR in Australia to introduce RSPCA-approved higher welfare chicken as a standard in their NSW and ACT restaurants.

Need a Mad Mex franchise loan?

Call us on 1300 889 743 or complete our free assessment form today to speak with a Mad Mex franchise loan specialist.

We can help you finance a range of franchise businesses!

  • 897Birdwood

    We want to borrow 70% of the costs to buy the business but we have a situation on our hands. We also have minor credit defaults, though they are from non-financial institutions. Where do we send in our info to discuss in detail?

  • Hello there, minor credit defaults, as long as they are all paid and under $1,000 from non-financial institutions, may not be a major issue with the banks. You can email in the details to us at info@homeloanexperts.com.au and we will have one of our expert mortgage brokers look into it and contact you for a full assessment.