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Buyer beware

on Tuesday, 18 September 2012. Posted in Analysis

Becoming part of a franchise is less risky than starting a business from scratch, but is not entirely without uncertainty. Mitigation of those risks, begins with thorough research...

Buyer beware

Experts generally consider that franchise opportunities grow quicker and survive longer than independent start-up businesses. Belonging to a network of businesses has many benefits for franchisees, including brand recognition, greater buying power and being able to follow proven marketing strategies. The opportunity to share best practice and to talk through your problems with other franchisees is a valuable resource which is should not be overlooked. 

After nearly 30 years in banking, I’ve seen thousands of business plans and the one thing they have in common is that the writer expects to build a winning business. Failure is not an option. And while it’s true that commercial failure rates amongst those people who have invested in a franchise brand are significantly lower than those setting up a business from scratch, doing so will not automatically guarantee success. 

To start with, you can boost your chances of finding a winning franchise by doing painstaking research. What’s more, well-established franchise opportunities that have been tried and tested over many years offer the investor less risk. That said, it is important to remember that running any business will take a lot of hard work, commitment and enthusiasm to succeed. Newer franchise opportunities should not be dismissed out of hand, however, thorough research is essential to ensure that you make an informed decision about the investment.     

Spotting the next big trend and distinguishing it from fads which come and go in a flash can be difficult. People who are unwilling to listen to guidance are setting themselves up for a big fall. I often speak to people who are unswerving in their defence of their idea, despite having only undertaken basic research. 

It can be helpful to bear in mind: ‘All that glitters is not gold’. Amongst the hundreds of viable, ethical franchise brands, there are a few to steer clear of if you wish to build a successful business. The old English proverb ‘a fool and his money are soon parted’ rings true for the unwary investor who commits to joining a franchise opportunity they haven’t fully researched. 

The choice of franchises can sometimes be bewildering. Banks with a specialist franchise department are often a good source of free, independent advice. They are invaluable in making sure that you’re taking the right steps and don’t miss any vital information. The British Franchise Association runs exhibitions and seminars that provide an invaluable insight into franchise investment.

Lloyds TSB also sponsors a series of free evening educational seminars held throughout the UK about the benefits and pitfalls of investing in a franchise. These are must-attend events for people seriously thinking about starting on their franchising journey. For further details and booking information 

visit the www.franchise-seminars.biz website.  

Of course, franchising is not right for everyone. For people who value independence, want to re-invent the wheel or run a business without restrictions, franchising might not be the right option. Anyone considering investing in a franchise must be prepared to ask some in-depth questions of the franchisor. Their responses will assist you in deciding whether the franchise is right for you. No investment can be guaranteed, especially when it depends on your own efforts as well as your franchisor and the market place. 

Finance is available for franchise investment from banks that have specialist franchise departments like the Lloyds TSB Commercial team. Talk to our trained franchise managers for guidance and support.

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