Heed this advice from Richard Holden, head of franchising at Lloyds Banking Group
Franchising offers many people a fantastic opportunity to run their own business with the benefit of knowing that training and support is on hand when needed. However, franchising doesn’t suit everyone. It’s a mistake to believe that investing in a franchise offers any form of guaranteed business success - it doesn’t. There is a great deal of hard work and determination needed to establish the business in your chosen location or territory.
Ethical franchisors will want to ensure as far as possible that you are the right fit for their networks. Alarm bells should be ringing if you’re offered a franchise without being made to jump through a few hoops to assess your own suitability.
You need to carefully research your options before signing on the dotted line and parting with your hard earned savings. Most people understand the need to thoroughly check out the franchise brand, local market, financial projections, the level of support provided and legal agreement, as well as speak to as many existing franchisees as possible. However, they often neglect one of the most important steps, which is to reflect on their own skills, attributes and motivations.
A period of self reflection as to whether you’re suited to franchising is often overlooked and could prevent costly mistakes and even potential business failure. If you’re someone who is very entrepreneurial or wants to reinvent the wheel, franchising is not for you and you would likely be more suited to setting up your own independent business from scratch. Franchising is all about following a system, so if you find any difficulty in following the rules save yourself potential heartache and don’t invest in a franchise. If you’ve successfully followed instructions in a previous role and you’re happy doing so, franchising may be an option for you to explore.
People who come from a systemsbased background are likely to have a higher success rate in franchising, as they already know the benefits of following the model.
Their way or the highway
You don’t have to be a robot to be a good franchisee, but you do need to understand that the franchisor is the custodian of the brand and business model, so it’s their way or the highway.
If you have a stubborn streak or are independently minded, think carefully about whether franchising is the right option for you. There is nothing wrong with these personality traits - I recognise them in me - but investing in a franchise system is possibly a wrong choice for these people.
Prospect franchisee certificate
The good news is that the British Franchise Association provides valuable guidance to would-be franchisees to help them make an informed decision about their options.
The Prospect Franchisee Certificate programme, which has been jointly developed by Lloyds Bank and the British Franchise Association, is an essential tool for all who are new to franchising. This modular training programme of informative videos, delivered by sector experts, is free and can be accessed online at bfa.trainme.tv.
Thorough research is the key to owning a successful franchise. There is usually plenty of initial information available on the internet, both positive and negative, about the brands you are considering to help you decide whether you wish to take the next step to investigate further.
Once you have established you wish to learn more, an approach to the franchisor will be necessary. Remember, the franchisor will be assessing your suitability from your initial contact onwards, so it isn’t just you deciding whether the business is right for you. Take the opportunity to meet the franchisor and the head office support team to get a better feel for the business.
Speak to existing franchisees
Once you’ve shown commitment to invest, the franchisor should give you access to speak to existing Speak to as many existing franchisees as possible before you make any decision franchisees. This is an essential step in deciding whether a franchise you’re researching is the right investment opportunity for you and is often not given sufficient attention by prospective franchisees.
Speak to as many existing franchisees as possible before you make any decision. The franchisor may well wish to manage the process. However, you should be allowed to speak to whoever you like and as many of the franchisee network you wish to enable you to make an informed decision about the franchise opportunity.
By carefully selecting your questions, existing franchisees can reveal a lot about the opportunity and the franchisor’s attitude to supporting the network. This may raise concerns or give you comfort about the big decision you’ll need to make about committing to the franchise or not.
Don’t be rushed into making your decision and if you feel pressurised into making a commitment before you’re ready to do so, be prepared to walk away. Ethical franchisors will be aware that you’re making a significant commitment and will give you all the information required for you to be able to make your decision in your own time.
How the banks can help
Before you make your final decision, speak to a bank’s franchise team to get their view on the viability of the franchise brand you’re researching.
If it’s an established franchise, it’s likely a bank will already have a track record of supporting its franchisees and may be able to give you some valuable insight.
A bank’s franchise team will also be able to give you some useful guidance on producing a robust business plan and financial projections.
It’s important that you not only understand the capital required to make your initial investment, but also the working capital needed to operate the business until it’s profitable and can start to generate you an income.
The Lloyds Banking Group franchise team are available to support you with all your franchising needs, whether you’re an existing bank customer or not.