While starting your own business can be exhilarating, don’t just come at it hell for leather. This could be the biggest decision of your life – here’s how to invest smartly
Contributors have written some great educational articles about how franchising works and the benefits it offers to prospective business owners. But, there are literally hundreds of franchises available in the UK market, and trying to figure out which businesses could offer you the best chance of success can be daunting, if not slightly overwhelming.
After all, it’s not uncommon to see many competing brands’ advertising and PR using similar messaging and offer virtually the same promises.
So, I wanted to offer some guidance on how you might sift through the unsuitable and the unviable; then whittle down all remaining possibilities, until you find the sector and brand that offers a perfect fit for you.
After all, it’s not just about identifying the strongest model to follow – it’s about finding a business that will make you jump out of bed each morning; a business that you will really enjoy running.
The franchise world is your oyster!
I’d always recommend that you start off looking at all of the options, especially those that you’ve not thought about before. One of the joys of franchising is that it gives you the option of moving into a completely new sector, once you’re confident that you have a proven model to follow, and the support of a successful franchisor behind you.
So, step one should be to discover the range of industries that offer franchises and create a list of sectors that interest you. View this as your chance to open up new opportunities and pursue your dreams.
Where do your strengths lie?
You will always have a greater chance of success if you enjoy what you do. Talk to family and put your transferable skills, attributes and personality strengths down on paper, then research the sectors that interest you, to get an idea of what each business model involves.
Feature articles in franchise magazines and listing websites are a good place to start – they will often outline a franchisee’s key roles and responsibilities, which you can measure yourself up against.
It’s fair to say that in any business you need to be prepared to move out of your comfort zone, but it’s equally important to be realistic about where your strengths lie, and to be honest with yourself – you can only expect to replicate the success of the system if you are prepared to follow it to the letter!
Do the numbers stack up?
If you’ve not already done so, stop and figure out what you can afford, and what could offer the financial returns that you need. You don’t want to waste time, or emotional energy, getting excited about businesses that are not financially viable. Although individual brands’ fees and projected financial returns will vary, you will be able to get ball-park figures by looking at a couple within each sector. Franchise directory websites will give you an overview of the total investment levels but it’s worth making a call to check whether the amount quoted includes working capital (money kept in the business, to support cash flow). You will need to know the initial fee; the working capital requirement; the management service fee (usually a percentage of revenue that is paid to the franchisor in exchange for their ongoing support) and any other ongoing fees and costs, such as a contribution to a centralised marketing fund.
“Don’t overlook the benefits of working close to home”
It’s also prudent to view any promises of ‘guaranteed income’ or ‘profitability above x%’ as purely indicative at this stage – most franchisors will want you to sign a non-disclosure agreement before they give you a proper insight into the performance of their network.
Check out the USPs
Within your sectors of interest, it’s important to identify who the key players are and to take a closer look at their differentiators.
Maybe you only want to look at leading brands, or perhaps you like the idea of working with a relative newcomer into the market, where there’s greater potential to help them shape and develop their business model.
This is a great time to attend a franchise exhibition – they offer an opportunity to meet and compare a few brands under one roof. Alternatively, take time to work your way through websites and prospectuses, and book in some phone calls. This is where the information comparison can get a little overwhelming, so I’d recommend compiling a spreadsheet.
Regardless of how long the franchise has been operating, you need to be confident that its model is credible and ethical. Key things to look at may include industry awards, client reviews, and professional memberships, such as industry associations. If the industry is regulated, then make sure you study compliance ratings, and remember that all members of the British Franchise Association (bfa) will have passed a fairly rigorous accreditation process.
Look at the lay of the land
Territory availability is an important discussion point – the most established franchises may not have anything nearby to offer. I’d advise asking this question early on, rather than setting your hopes on an opportunity that isn’t available within a reasonable distance.
When looking at territories, you’ll need to assess how well suited the area is to the business model. Don’t overlook the benefits of working close to home: reduced travel time, more time with family, and having connections and local knowledge that will help build the business.
Complete your due diligence
By the time you’ve concluded your initial phone calls, you should be building a picture around the financial model, the strength of the brand, and the available territory, which will deliver a short-list of viable opportunities.
From this stage, there are key steps to complete your research into the brands that interest you most.
• Visit the franchisor: see their set up; gain a feel for how they run their business and the culture within their network
• Speak to other franchisees: be wary of any franchisor who is unwilling to let trading owners validate what they have told you
• Carry out local competitor analysis, to understand the market in your area. Build a conservative financial forecast, based on the findings of your local research
• Study the legal agreements and get them checked by a bfa-affiliated solicitor – it’s vital that you fully understand the commitment you’d be making
• Look at facts and listen to your instinct: Do you like and trust the integrity of the franchisor? Is there clear evidence of support to other franchisees? Is there long-term potential in the marketplace?
Make an informed choice
There will always be a level of risk that comes with investing your money into someone else’s business model. But by carrying out careful and thorough research, you really can minimise those risks and give yourself a much greater chance of success. And if you find a business model that plays to your strengths, and has been proven to work successfully for others, then you have to ask yourself why should it not work for you? At that point, success lies within your hands and will be determined by the drive and hard work that you put into your new business. Good luck!
Kate Dilworth is franchise recruitment manager at Right at Home UK.