Investing in franchise can be a little daunting. Which one is best for you? How many hours do you need to put in? And what will the fees be like?
Here are the eight key questions you must ask before you invest in a franchise:
1. Does the franchisor have a proven track record?
Firstly, you have to determine if you can trust the franchisor’s pitch. Ask yourself: does the company have lots of case studies of successful people? Does it have case studies of franchisees who have been in business for years or are they all new to the network?
How long has the company been trading? What awards has it won? How many franchises does it sell a year? How highly is it regarded by the industry it’s in and what do the franchisees say about the business?
A good way of finding out about the company is to speak to as many franchisees as possible, both established and new, about their experiences. If a company is reluctant to let you speak to its franchisees, there might be a reason for it.
2. What training and support does the franchisor provide?
Does support come in the form of mentoring programmes? Does the franchisor help with business development? Does it actively help you grow your business?
When is head office support available for franchisees? There’s no point having a helpline in operation from 9am to 5pm if you’re running your franchise in the evening. We know people book holidays in the evening, so our support team is available every night until 10pm to assist our travel consultants to complete bookings if necessary.
Also, check out whether you’ll get to meet the people your franchisor employs as support staff. Does it organise training days, conferences and other events where you can meet up with franchisees and head office teams to discuss the business and its future plans?
3. How long is the contract you’ll be expected to sign?
Some people might be surprised when they find out the franchise agreement they’ll be asked to sign lasts for three years and want a shorter one. But you should feel reassured by a longer contract.
The reality is, you are going to spend your first and second year building the business. If you only have a one-year contract, it means you can terminate after one year, but it also means your franchise company can terminate the agreement after a year too. Many people are worried about commitment, but if you want to build a business for the future commitment is good.
4. Will you enjoy it?
Are you passionate about the franchise and the industry in which it operates? Do you believe in what you will be selling? If you aren’t passionate about it, there’s little point in joining the franchisor’s network, as you won’t be fully committed to making your business a success.
Yes, there might be a market for widgets or gizmos, but if you don’t care enough about them, your potential customers will know.
5. Will your franchise help you create a legacy?
Can you gift your business to a member of your family or leave it to somebody in your will? Is it something you are building for the future that will benefit your loved ones after you are gone? Our franchises are willable, so franchisees know they’re working to create something their children and grandchildren could take on, if they wished.
6. Do you understand how the franchisor makes money?
Some franchisors make money by selling franchises. So if you see a franchise being sold at a significant discount, it suggests there are thousands of pounds worth of extra profit available to the franchisor to start with in order for it to be able to offer you such a ‘bargain’.
We give our franchisees a money-back challenge. So if we’re willing to give the cost of the franchise fee back to them, then clearly there’s no profit in it for us.
7. What are the restrictions on the franchise?
Is your franchise restricted by area or territory? Is the relationship between different franchisees collaborative or adversarial? Our franchises aren’t restricted by territory because everyone has their own network of people in it and with 700 franchisees and 70 million people in the UK, there’s not much of an overlap. Everyone is part of the same team and we encourage franchisees to work together and share their journey to success.
8. What’s the ethos of the company and what are its values?
Have a look at the news section of a franchise company’s website and see what the team has been up to. Is it all about the franchisor or is their information about franchisees and their successes? Does the business support charities and help its local community?
This year, we’ve pledged to raise £50,000 for mental health charity Mind, including trekking through Columbia to the Lost City. We also have our Partners in Travel scheme, where franchisees can partner with a good cause and for every booking a donation is made. We want to give back to our communities and make it as easy as possible for our franchisees to support good causes close to their hearts.
Steve Witt is co-founder of The Travel Franchise and its sister travel arm Not Just Travel