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What To Consider Before Buying A Franchise

Posted: 29 Jan 2018
Estimated Read Time: in 17 minutes

Shaun Thomson, UK CEO of Sandler, reveals the key areas to consider before you invest in a management franchise

What To Consider Before Buying A Franchise

Starting your own business is a big decision and you need a big vision for it - why you’re doing it and where you’re going with it.

There’s likely to be some short-term pain as you transition from a corporate or senior position to your own business. You might come from running a large team and now suddenly you’re doing everything from washing up to being the managing director So focus on the bigger picture and realise you’re likely to have to change how you work along the way.

As a franchisor, I’m looking for a commitment to change in a prospective franchisee and positive thinking about that change. There are two big decisions to make:

Do I want to get into business on my own?

What is that business going to be?

You must focus on that first decision before you do anything else or you’ll never find ‘the right thing’. It’s a different question to simply: ‘Am I going to buy a franchise?’ Be honest with yourself about that first question.

Qualify hard

You’ve got to rigorously qualify each franchise you’re considering and learn about the business that franchisees run.

Gather detailed information on each brand, so that you don’t just think you know what they do. Take yourself two, three, five years down the road - can you see yourself being happy doing what a franchisee does? Are you excited about it?

If not, remove it from your thinking.

Do something you want to do. Understand your passion for it.

Essential ethics

The British Franchise Association is the independent professional body for franchising. Just think for a second, if a brand is serious about franchising in the UK, why would it not join that body?

When I started Sandler Training in the UK, I thought the qualification for joining the bfa was probably more of a tick box exercise; it’s completely the opposite. It’s a rigorous process to become a bfa member and you must sign up to the code of ethics for franchising.

If someone isn’t a member, is it because they don’t want to be or because they couldn’t satisfy that process?

Look backwards and forwards

Everything’s new at some point, so this really means: is there proof a franchise works?

Even if you’re going to be the first franchisee, is there evidence you can succeed, as shown by a third party? If it’s an overseas brand, it may work in Australia or the US, but is it proven in the UK market?

It’s also important to look at how forward thinking the franchise is. It’s one thing if it’s successful now, but what’s happening in the future?

At Sandler, the core content of what we do has remained consistent in the 50 years we’ve been in business, but how people learn has changed enormously. I’m of the age where I like to see things printed out, but nowadays people want content on their iPad or phone.

That’s why we’ve launched an online system that’s years ahead of anything else on the market. So not only are we changing how we deliver products to our clients, we’ve adapted to those markets. It’s very important any franchise you consider is future proofing continually.

Joined up thinking

You want to see the whole network of franchisees - not just head office - works collaboratively and supportively. At Sandler, we do that through our UK and US conferences, having overseas franchisees in different specialist areas coming over to talk with our network.

Our franchisees also share business directly with each other. However it works, check there are processes in place, because your business is better when the network’s in sync.

Market research

Check the market’s big enough to grow. What’s the competition? Be honest with yourself on both these points.

You shouldn’t have to create a market yourself with a franchise - it should already be in evidence. You want to see there’s at least the potential for the franchise to become the go-to brand in its market.

It’s also much easier to sell more things to the same people than sell something once and have to constantly find new customers. I’d want to see I can find new clients, as well as grow my turnover with existing ones.

Growing gains

Examine how franchisees get new customers in and subsequent customers afterwards - what’s the process for doing that? Will you get support on that for the first few months, then be left to it?

You’ll need to be comfortable at sales, whatever kind of management franchise you’re looking at, but check the systems the franchisor has in place to see you win new business.

Think exit while you enter

Consider your eventual exit strategy from an early stage.

Whether it’s selling the business or moving out of the day to day more, we want to see your vision for the business. We don’t want to set you up with something that can’t achieve your vision. You need to look at the opportunity as a business, not as an employee.

Culture club

it’s important to learn the culture, ethos and feeling of the franchise and make sure it sits well with your own ethos.

Don’t just be blinded by the numbers - one franchise may promise higher earnings, but you know it’s not right for you. You then have a choice to sell your soul or you can be true to yourself.

Your business and personality values should be aligned. That’s where you’ll find true serendipity and going to work will be a real pleasure.

And finally…

Whatever you choose, you’re not doing it in isolation - you’ll be liaising with either your team, your clients or both. That means communication and people skills are paramount.

Even in our digital age, people buy from people. You’ve got to have a personality that people warm to and want to work with, whatever you choose to do.

Number crunch

Don’t be bamboozled by marketing speak when people are throwing numbers at you - look for gross and net figures, turnover and profit and be clear what you’re being quoted.

Also consider what happens when you sell and what the return on investment is likely to be. Can you build it as a business rather than just a oneman band, so that it has a strong resale value? Some business coaching franchises limit the employees you can take on, which limits the return on the sale of your business. At Sandler it’s unlimited.

One quarter of Sandler’s US franchisees have turnovers of over $1 million and that’s where we’re taking the UK. We have a few franchisees in a friendly rivalry to become the first in the UK to turnover £1 million this year. It’s very exciting and shows the growth potential of the business.

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