In this month’s feature I will discuss how to select the perfect franchise for you. It’s a huge decision, and should never be rushed. Never act on the spur of the moment. Don’t rush in, and always take your time. And after 30 years in franchising, I can’t downplay the importance of developing a strong working relationship with the franchisor.
Regarding the franchisor
Do they have a proven business history? How well documented is their systems, processes and protocols? Does the franchisor provide effective training and have they earned a reputation for robust ongoing support? Is the franchisor a member of the British Franchise Association (BFA)? These are all questions that need to be answered.
Understanding the market and competition is so important when starting any business
And the same applies in the world of franchising. You need to be certain it’s a strong and growing market, and that demand for the product or service can be sustained long into the future. There also needs to be room for growth.
Make sure you assess the competition because competition is so important. It illustrates there is demand for what you are hoping to sell. But you also need to analyse the competition and assess what they are good at. Then work out how best to compete.
Speak to franchisees
This will help you determine whether the business model is good for you. To ensure it is the right fit, prepare a long list of questions you want to ask franchisees. And speak to a handful of them, not just one.
Get a feel for how much money they are making, and how long it took them to make a decent profit. How many hours do they work? What level of support do they receive from the franchisor?
Ask them: Would they buy into the same franchise again? This is an important question to ask. And if the franchisor refuses access to any business partners, then consider this to be a red flag and walk away.
Talk to the professionals
When you have completed the above, and are still interested in owning a franchise, and have probably narrowed down your options to one or two, then the moment is right to seek professional advice.
This means contacting a lawyer who specialises in franchising; you will also need to talk to an experienced accountant; and then take a trip to your local bank to chat about investment and potentially a loan.
A franchise lawyer will read the agreement. The franchise agreement needs to be fair but, inevitably, will usually be written in favour of the franchisor. This is because the franchisor needs to protect the brand, while also protecting all of the franchisees within the network.
You will need to figure out how to pay for your franchise. You will undoubtedly use savings, may even have to cash-in your ISAs, and possibly contact your parents for financial help.
Always remember that a franchise is an investment, not merely a new job. Determine exactly how much money you will need to start the business. There is little point going ahead with the purchase, if you can only generate half of what you require.
An accountant will assist you in devising a comprehensive business plan. This is critical. Don’t over-extend yourself and ensure that you can make all repayments through the proceeds of the business.
Now make your final decision
Do I still wish to become a franchisee? Be honest. Do your strengths and weaknesses match the criteria? Can you see yourself enjoying the business?
Can you afford the business? Is it a good investment? Can you take the pressure? And, finally, do you have confidence in the franchisor? Have you answered ‘yes’ to all of the above? If so, you are ready to take the plunge.
