Your roadmap to becoming a franchisee

Nigel Toplis adopts a root and branch approach when advising budding franchisees on how to search for the ideal business.

Your roadmap to becoming a franchisee

Nigel Toplis adopts a root and branch approach when advising budding franchisees on how to search for the ideal business.

There may be no truer phrase ever spoken than when Napoleon Bonaparte described Britain ‘as a nation of shopkeepers’. Fact: There are currently approximately four million self-employed people in the UK. In December 2000 it was around 3.2m, with this figure rising to 4.2m by the start of this year.

However, it is also worth noting that there had been five million self-employed workers by the time Covid had wreaked havoc with both people’s lives and the economy. What these stats do show, however, is that Brits possess an underlying desire to run their own business.

And we have many good reasons for wanting to be business owners. These reasons include: Work/life balance, job security, to control your own destiny, or simply just wanting to run ‘my own business’. That said, I’ve never heard of anyone waking up in the middle of the night screaming ‘I must become a franchisee’.

Franchising is often something that sneaks up on you and is usually the result of some external action. This could be redundancy, lack of progress in a particular company or having an ambition to take early retirement. And there are many other reasons too, why people make such life-changing decisions.

But, before jumping ship, you should take your time to do your research. Never make instantaneous decisions without considering the consequences. During my three decades in franchising, I have met ‘the eager’, ‘the considered’, ‘the timid’ and ‘the confident’. These are all different types of people wanting to become a franchisee.

Purchasing a franchise is one of the biggest and boldest decisions anyone will ever make – it’s no different to getting married or buying your first house. You need a plan. It can’t be achieved off the cuff.

You need to know where to start, who to visit to seek advice, how to compare different franchises and what questions to ask. With over 900 business format franchises in the UK, how do you select the right franchise?

The following six steps should help you through the process.

Step 1: Initial Assessment

A good franchise needs to have the following: A proven business history; Documented systems; Effective training programme; Security of tenure; Ongoing support structure; Membership of the British Franchise Association (BFA).

Do some initial research online about franchises that you have an interest in. Are they professional? Have they been in business for several years? Have they been able to develop a strong franchise network? Does it look like they provide a high level of support? Are they in a large and growing market?

Many of these questions need to be addressed in detail when meeting the franchisor. Any initial assessment, through your thorough research, should enable you to narrow down the number of franchise options.

Step 2: Investment Cost

This is critical and needs to be discussed early in the process. Warning: A franchise is not a job. It’s an investment that needs to be meticulously planned and carefully calculated. You must never ‘over invest’, no matter how appealing the business may appear. Only invest what you can afford.

Don’t get carried away by the excitement of the moment. You need to work out exactly how much you need to invest and, more importantly, how much you can afford to invest. There is no point taking on a business that will only generate half of what you need. Don’t over-extend yourself.

It is also important to point out that major banks view franchising as a reasonably safe option for lending. They will generally lend up to 70% of the total cost for an established franchise.

There are also Government-backed start-up schemes which lend money to budding business owners. What you need to do is work out what your maximum investment level is going to be.

Step 3: Evaluating The Market

This stage is all about asking questions and here are 10 of them:

* Is the market robust (not subject to seasonality or fashion)?

* Can you see the market getting stronger?

* Can demand be sustained?

* Is the market fragmented? I like fragmented markets;

* Is the industry growing or declining?

* Is there a lot of competition?

* Are the competitors aggressive or passive?

* Are there multiple income streams available?

* Can you see new business opportunities?

* Do other industries have products and services that could compete?

You are searching for markets that are large, robust and accessible. By the end of ‘Step 3’ you will have narrowed down your options to a handful of franchises. These are ones that meet your criteria, such as: a proven history, good systems, effective training and BFA membership.

They are businesses you may be interested in and have some or most of the skills required. You will have noted that the required investment levels are well within your capabilities. And that these businesses meet your specification for having markets that are large, growing and sustainable.

Step 4: Comparing Franchisors

By now, your initial ‘shopping list’ should be reduced to no more than two or three franchises. Step four is all about evaluating the pros and cons of each. Use the BFA, Companies House, magazines and web sites to seek further information. How do the chosen few promote themselves, and how do they position their brand.

Have a long list of questions to ask the franchisor. Talk about market size, competition, repeat business, scalability and level of support. Never attend a meeting without questions as this won’t impress the franchisor. Ask to speak to network members. And if the franchisor refuses, just walk away as this is a huge danger signal.

Good franchisors will insist on you meeting existing franchisees. This is because it is only the franchisee who can really tell you about running the business from personal experience. And these same franchisees will feed back their impression of you to the franchisor. This will help the franchisor to make a decision regarding your commitment and suitability to their brand.

When you meet franchisees dig deep into their business. Ask about their relationship with the franchisor, the support they receive, and how long it took for them to reach break-even point. Even ask ‘Are you happy’ with the business?

Step 5: Professional Advice

Even if, by this stage, you feel confident about which franchise you wish to invest your time, money and energy into, that’s not the end of the matter. You still need people to help you understand the ‘small print’.

A franchise lawyer will help you to analyse the Franchise Agreement, while an experienced accountant can advise on drawing up a business plan. Franchising in the UK is well established and there are many good, experienced advisors ready to assist.

Step 6: Your Final Decision

Ask yourself 10 questions:

* Do your strengths and weaknesses match the success criteria? Yes / No

* Can you really afford the business? Yes / No

* Is it a good investment? Yes / No

* Will the ongoing rewards meet your expectations? Yes / No 

* Is there potential for expansion? Yes / No     

* Can you take the pressure? Yes / No

* Are you confident in the franchise company? Yes / No

* Are you going to enjoy yourself? Yes / No

* Are you prepared to work hard to achieve success? Yes / No

* Will you follow the franchisor’s system? Yes / No

If you have honestly answered these 10 questions ‘Yes’, then you are ready to become a franchise owner. Good luck.

Nigel Toplis
Nigel Toplis