You begin with a proven business model, a high degree of training and support and the chance to trade under an existing – and in many cases firmly established – brand name. Consequently, profits often arrive far sooner.
Yet there can be problems. As Business Link’s Nigel Lander explains, it is essential that you are “a real self-starter”. No matter what support you receive from the franchiser “you’ve got to be prepared to get out of bed in the morning”. If you don’t, as with any other business, your franchise will fail.
Do your homework
You also need to make sure you are taking on the right franchise for you. Horror stories of unsuspecting franchisees stumping up a large amount of cash, only to find themselves out of their depth and lacking in support are legend. But if you do your research properly this shouldn’t happen to you.
The British Franchise Association (BFA) should be your first port of call. The association enforces a strict code of conduct for its members and a full list of accredited franchisers is available through its website. To Lander, it is “critical” that the franchise you choose is either a full or associate member of the BFA.
Several other websites, including www.whichfranchise.com and the QFA are also worth visiting and offer you an insight into what’s available.
As part of your research, the BFA also recommends that you visit one of its accredited franchise shows. These are held periodically throughout the year, with the main exhibitions taking place in London (in April) and Birmingham (in September). Further details are available, once again, through the BFA.
The beauty of these exhibition is thaT they afford you the opportunity to talk to hundreds of potential franchisers in one go and to find out what they have to offer.
At this stage you need to consider how viable the product is and how successful existing franchisees have been to date.
New franchise may cost anywhere between £50,000 and £500,000 to establish, so it is also essential to discover how much you will have to pay and what degree of support, training and financial return you will receive for your money.
Bear in mind, however, that a better-known business, like a McDonalds, may cost more, but the degree of brand awareness should make it far simpler to gain custom.
Check again
According to the BFA, the next step is to draw up a list of up to six potential franchises and speak to as many existing franchisees of those businesses as possible before signing any agreements or handing over any cash.
Don’t just settle for the ones that they recommend to you either. By questioning a broad cross-section of existing franchisees you should discover how much support and training you get for your money, how successful the franchiser is at fulfilling its promises and how realistic any sales projections you have been given are.
BFA members are also obliged to provide you with their financial records, directors’ histories and basis of projections on request, so be sure to make use of these.
Don’t be afraid to ask questions, remember that any franchiser worth its salt will be just as eager to check you out and to guarantee that you are capable of delivering on their business plan. Expect to field plenty of questions yourself along on the way.
Finally, make sure you seek the appropriate professional advice at all times. Most of the major banks have franchise experts, with whom your local branch should be able to put you in touch.
It is also essential that your solicitor check any agreement, to make sure there are no loopholes – what happens, for instance, if you fail to match specified performance targets?
Franchising tips
If, having weighed up the pros and cons, you decide that franchising is right for you, be sure to follow these top tips from the BFA:
– Speak to a range of existing franchisees, and not just the ones the franchiser directs you to.
– Be sure to choose a business that suits you.
– Be realistic about the amount of money you need to make and choose a business that should cover it.
– Ask the franchiser to disclose their financial records, records of directors and the basis of any financial projections you have been supplied with.
– Take professional advice and have a specialist solicitor check over any agreements prior to signing.
