Here’s how a comprehensive checklist can help you choose the right franchise
I bought this franchise because I fell in love with it. Call me cynical, but that’s a risky reason to buy a franchise.
Yes, you should love the franchise you invest in, but if you make ‘falling in love’ the main criteria on which you base your choice, you’re in dangerous territory.
Deciding which franchise to invest in is a business decision that requires input from the head as well as the heart. You must take into account the practicalities as well as the passion.
With that in mind, here’s how a checklist can help you choose the right franchise.
Why you should have a checklist
Listing your particular requirements will help speed up the research process and create a structured way to choose between franchises - how many boxes does X franchise tick compared to Y? Also, franchisors say it can enhance your chances of being accepted as a franchisee.
Why franchisors like checklists
Cathryn Hayes, franchise director at car repair franchise Revive!, says: “For me, evidence of a prospective franchisee using a checklist makes them a stronger candidate.
“It means they’re more serious about exploring the franchise opportunity and have thought about what they need to know and taken some advice about the sort of questions they should ask.
“If someone doesn’t ask any questions or doesn’t seem to want to explore important aspects of our franchise, that would ring warning bells.”
Chris Wootton, managing director of cleaning franchise Poppies, is a big fan.
He explains: “As a pilot, I know that we would never get a plane off the ground without checklists.
“A plane only flies when all the systems are working properly and all work together, so I love checklists and feel an affinity with people who use them.
“When a franchisee candidate meets me and has a checklist, I think they’re more likely to be a logical thinker who can follow systems - that’s a big tick on my checklist.”
Julie Wagstaff, chief executive of business coaching company ActionCOACH UK, says:
“Checklists help with systems and quality checking - useful when choosing a franchise.
“People who write and refer to lists tend to enjoy following systems too, which is an ideal trait to have when you’re investing in a proven franchise system like ours.
“I think an engaging personality plus a liking for using and completing checklists makes for the beginnings of a great ActionCOACH franchise partner.” personal list will vary according to your own situation and requirements.
I’m assuming you have already determined you are suitable for franchising, that you have transferable skills, such as sales and marketing or management skills, and have selected your target business sector/s.
The ‘choose my franchise’ checklist
Draw up a list of features you want in your particular franchise and compare franchises to check they meet your criteria.
What lifestyle do I want?
Full or part-time work or a flexible hours ‘lifestyle’ business that can be operated around other responsibilities?
Do you want a profit-focused business with the aim of growing it and employing staff? Do you want to do the work yourself or a management franchise where you run the business and employ staff? Mobile franchises may suit those who like to be on the move; retail and catering franchises will often need local premises.
There is also an increasing number of franchises aimed at existing business owners who want to invest in order to diversify or people with jobs who want a franchise as a ‘side hustle’. Whatever lifestyle you want, check if the business can support it.
Does it fit my life goals?
Do you want to retire in 10 years or do you want a flexible business while your children are young? Franchise terms can range from five to 20 years. You can usually renew, but the latter may be a bad choice if you want to get out sooner.
What’s my attitude to risk?
Long established franchises with a good reputation may be less risky than new ones, but new franchises can mean those who get in early on can shape their future direction.
Can I afford it?
See the funding checklist panel.
Is the franchise I’m considering financially sound?
Check out Companies House records about the business. The same goes for the people behind it.
If it’s a new franchise, did it run a pilot franchise and how successful was it?
Even a successful company may not work well when it’s franchised.
Has the model shown historical success?
Steady growth tends to be good. Soaring growth rates over a short period can indicate that franchisors are taking on anyone who can come up with the cash, which is not usually a good sign.
Have recent franchisees been successful?
This is worth checking out to ensure the franchisor is continuing to support franchisees and that the market for its product or service is still healthy.
What do existing franchisees say?
Some franchisors allow you to speak to any of their franchisees; others provide a list of contacts. Do not be afraid to speak to other franchisees though.
Jack suggests: “Check if any of the current network of franchisees have recommended the franchise to friends and family and they’ve gone ahead and joined the network. I think that speaks volumes.”
Do existing franchisees go on to renew?
Jack points out: “Check the renewal rate. If it’s low, why is that?”
Can I work with the franchise management and do our values match?
Chris says: “It may seem odd to use a checklist to match values and relationships, but I think it works when investing in a business.
“List the personality traits you’re looking for in a franchise support team. You must be happy in a business if you’re to reach financial goals.”
Are you hungry for fast growth?
Some franchises actively encourage franchisees to open extra outlets fast - sometimes within as little as 18 months. It means your business grows fast, but it can put you under pressure, which may not suit you or your family.
Other franchises aim for more steady growth. Which approach suits you?
What ongoing training is available to franchisees?
Cathryn says: “All franchises provide initial training, but provision of further training shows your franchisor is committed to supporting you on an ongoing basis, not just at the start.”
How easy will it be to grow my business in the territory?
Cathryn suggests you consider what growth your territory can accommodate and whether you can buy additional territory. If so, at what cost?
Can I renew my franchise and at what cost?
Cathryn says: “You should be able to renew and normally this just incurs some legal costs, not the full franchise fee again. If not, that could be a warning sign.”
Am I being lured by the prospect of big money?
When there are lots of pound signs being bandied about, our capacity for self-deception can be large. Refer to your checklist - it should bring you down to earth.
Am I falling in love with a particular franchise?
This is a dangerous condition. It could be infatuation. If you find yourself gushing to friends and family about it or are embarrassed about your level of overenthusiasm, back off for a bit.
Refer to your checklist and give yourself some time before making any decisions. As the old saying goes: marry in haste, repent at leisure.
A checklist for funding is vital. Here’s a basic list drawn up with the help of Rob Orme at Chantry Group:
What are the total start-up costs associated with the franchise? This includes the franchise fee, VAT and working capital.
Working capital is the cash needed to operate the business on a day-to-day basis. It’s essential this figure is not overlooked when starting up, as your business outgoings are likely to outweigh its sales revenue at first.
Have I got a cast-iron business plan and financial projections?This will include, typically, a projected profit and loss account, cash flow forecast and a projected balance sheet over a three to five-year period.
Without a strong and realistic business plan, a lender is unlikely to say yes, particularly at the first time of asking.
Can I pay my bills? Business planning should include your household income and expenditure.
If starting the business puts you in a position where meeting your outgoings becomes difficult, reconsider the franchise investment unless you can reduce your household outgoings.
What’s my personal credit rating? Find out from the credit reference agencies. A poor rating can scupper your chances of borrowing.
What are my borrowing options? The franchise arms of banks will often lend up to 70 per cent of the start-up costs for a proven franchise that they know well, but you will need to find the other 30 per cent.
There are other funding specialists too. A broker could help you understand the various available options, particularly since the pandemic, which has changed the lending landscape significantly and it continues to evolve fast.
Find out if you can get any government support, perhaps a grant or a start-up loan. Check out gov.uk/ business-finance-support
Jenni Morgan, ActionCOACH
“It ticks everything on my list and more”
Jenni Morgan was introduced to coaching as a line management style when she was a graduate trainee with Mars. After 15 years at Mars, a spell teaching maths and working as head of marketing in a small to medium-sized enterprise, Jenni wanted to get into coaching.
In spring 2018, she wrote a future career checklist, including what she enjoyed, her skills and values. She also wanted a role that provided ongoing professional development.
Jenni says: “I’d just finished my checklist when I got an email about the ActionCOACH franchise. “It seemed to answer my coaching wish, but I decided to research similar franchises, shortlisted one other with ActionCOACH and registered for their discovery days.
“I chose ActionCOACH. It ticks everything on my list and more.
“ActionCOACH’s 14 Points of Culture overlap with the values I listed in spring 2018.
“They’re not just a list of phrases - you see them walking and talking every time you meet a franchise partner or catch up with someone from the franchise support team.”
Rob Piper, Poppies
“I had a list of must-haves when it came to starting my own business”
Rob Piper, the Poppies cleaning franchisee for Liverpool, says: “Whether it’s food shopping or holiday destinations, I always have a checklist.
“So naturally I had a list of must-haves when it came to starting my own business after I was made redundant just over 10 years ago.
“I was lucky in that instead of leaving immediately, I was asked to stay on for a couple of months, which gave me the time to research my next move and build a thorough checklist.
“This business ticks my personal and professional boxes.
“It utilised my skills, could be scaled up, the values matched my own and I could speak to any of the franchisees in the network, not just a few that were handpicked by the franchisor.
“I didn’t have to invent anything; systems and processes would be in place for me, I was given training and supported from day one by head office.
“These were key selling points of Poppies for me - that and being able to make a difference in other people’s lives.”
Linda Whitney writes about franchising for the Daily Mail, What Franchise and many other publications.
You might also be interested in
- Brexit property investment myths BUSTED!
- Franchising can turn your great resignation into an exciting new career
- How to best manage your budget to invest in the resources you need to grow
- How to build your own business empire and scale it to success through franchising
- “Creativity is what makes the world go round”