Franchising is one of the safest ways of owning and running a business, with very low failure rates, however, there are still some ghoulish frights you’ll need to avoid if you are to own a successful, profitable business.
Not all franchises are equal
Beware of thinking that all franchises are equal and will perform as successfully as each other. The phrase Caveat Emptor (Buyer Beware) has never been more relevant than in franchising. As an unregulated sector you really do have to do your own homework before parting with your money, but there are things you can do to ensure you are buying into an ethical, sustainable, profitable business.
How long has the franchise been operating?
We’re not suggesting for one moment that new franchises can’t be successful, they absolutely can, and are, but when buying a new or relatively ‘untried’ franchise you are obviously taking a bigger risk. Equally with bigger risk comes the chance of being in on the ground floor and potentially negotiating a great price for your territory. If you are going to buy a new franchise, you need to do plenty of research into the viability of the market and the need for the product/service. If you are buying from a new franchise within a larger group, you should be fine as the franchisor will be very experienced.
Do the figures add up?
Don’t be swayed by brochures full of pictures of happy franchisees, drill down into the figures. Do they add up? Predicted figures usually come with an asterisk beside them, find out what that asterisk means, does it mean you’ll only achieve these figures if you build a team, or can they be achieved on your own?
Talk to the other franchisees
After some time talking to the franchisor, naturally, you’ll want to talk to the other franchisees. The franchisor will tell you to contact their most successful franchisees, and this is totally understandable. They aren’t trying to hide anything, they simply want to show you how successful you can be. However, it is important you talk to as many other franchisees as you can, not just those they guide you towards. Be aware that not all franchisees will be 100% positive about the business; as with all things in life, this is normal and should not unduly concern you unless the same gripes crop up in multiple conversations, at which point you need to take it seriously and either address the issue with the franchisor or walk away.
You are buying a business not a job
Sometimes, when people come to talk to us before they’ve done any serious research, they think they are buying a job, not a business and we go to great lengths to disavow them of this misinformation. When you buy a franchise, you are buying a business in a box. That box is full of everything you need to run your business. The two things it doesn’t contain are clients and hard work, both of which you must provide yourself. We know what you need to run your franchise successfully because we’ve done it ourselves, now we need you to put your shoulder behind the wheel and get it going, with our full guidance and support. Once we’ve shown you how, marketing, advertising, finding clients and providing a first-class service are all down to you.
You may only make serious money if you build a team
Although some people are very happy to run their business alone, the truth is you are never going to make big money that way. However ‘regaining a work/life balance’ is often a reason given for people buying a franchise (meaning money may not be your driving factor), which is fine, but be aware that with most franchises, you will only start making big money when you employ staff and expand your business. When you move into the multi-territory stakes you are looking at big returns, turning your small business into a management franchise with you running your team from head office.
Finally, always employ a specialist franchise solicitor to check the franchise agreement before you sign. You can find a list of them on the bfa website. https:/www.thebfa.org/affiliate-directory/
