If so, allow Richard Pakey of Lime Licensing to help you make the correct decision.
There are many ways to own a business. One way is to become involved in franchising, where you buy into a tried and trusted model which has been fine tuned over many years – perhaps even decades. But, as I’ve mentioned many times before, this option is definitely not for everyone. And if everything turns sour, it is neither great for franchisor nor franchisee.
The benefits
You purchase a proven business system in exchange for an upfront fee, which includes a comprehensive training package. Training focusses on getting you up to speed within a matter of weeks. When you choose franchising, you sign up to a brand. Under the clause named ‘Rights Granted,’ you can use the brand name under certain conditions – providing you remain as a franchisee. All of this helps you to hit the ground running. For those who prefer to start a business on their own, the statistics show that there is a greater risk of failure. Better to be part of a franchise than an independent business start-up.
Choosing a franchise
Think long and hard about the type of franchise business you wish to start. There is little point in buying a franchise simply to ‘buy a job’. A contented franchisee usually performs better than someone who treats the business as a job. And to perform well you will need enthusiasm for the product you are selling and enthusiasm for the people you will meet and employ along the way. If you already have a good knowledge of the sector – great – but this is not obligatory.
The better you perform, the better it is for both franchisor and franchisee. Once you have selected your franchise, make certain you give 100% to the training procedure. It’s important to show the franchisor that you are motivated and keen to learn the ropes. The last thing the franchisor wants to do is place a red flag by your name.
The best franchisors want to see commitment, more than your franchise fee. Ask questions, compile as much information as you can about the franchise, and leave no stone unturned. This is necessary at all stages: Before you purchase a franchise; When undertaking training; Then during the early months of running your new business.
What are franchisors looking to achieve?
The aim of all franchisors is to find a suitable business partner to operate their brand in a particular region. It is not about selling ‘units’ and generating franchise fees. These fees cover the cost of getting new franchisees launched – and little else. It only becomes lucrative for the franchisor if the franchisee is successful, which is win-win for both parties. The franchisor collects royalties from a booming business.
Franchise agreement
The franchise agreement is an important document that will inform you of your obligations to the brand. It ensures that you and your fellow franchisees maintain high standards. Reputation is everything. The last thing a diligent franchisee needs is for another franchisee to create problems that will affect the prestige of the brand.
Use the services of a legal representative who specialises in franchising. It is well worth the money. You may also be able to access franchise consultants who will educate you about taking on a franchise. Consultants are often hired by franchisors to check out and find suitable candidates for their business, as it’s important for the long-term health of the network.
Do you have enough cash?
There are some downsides to franchising. In addition to having enough capital to buy a franchise, you must also ensure there is enough available cash flow to cover the early months of trading. If you need to borrow money from a bank, and many franchisees require this service, choose carefully. Do your maths before signing up for any package. As with all businesses, a franchise is not a business where customers are waiting by the door the moment you open it on day one. Follow the process, work hard and the rewards will come.
As a franchisee you will not have total control to do what you want. The process is laid out in front of you, as written in the franchise agreement, so follow it. Although franchisors are usually receptive to new ideas, they always have the final say. You signed up to a franchise business therefore you are governed by their rules. If you want to side-step convention, and do things your own way, then franchising is probably not for you.
Get help
The good news is that franchise consultants shouldn’t cost you a penny, as they are mandated by the franchise brand. Consultants know the process better than you, and often represent the brand independently. It is their job to find suitable candidates and they will even guide you through the appropriate channels until you accept or reject a proposition.
Finally, let’s finish on a positive. It has been widely reported that franchising has consistently grown through the last few recessions. However, the franchising industry in the UK is smaller than in many developed countries. This means the potential to grab a share of it is extremely good. The choice remains wide. Take a look.
