Lynne Lister, managing director of X-Press Legal Services, explains what prospective franchisees should expect from their franchisor and the practical reasons why
Every year, as the franchise industry grows and franchising becomes increasingly diverse, prospective franchisees could be forgiven for feeling overwhelmed and somewhat confused by the wide choice they face in choosing the franchise for them.
Individual franchise packages are very varied, boasting a huge range of benefits, terms and conditions that differ enormously between franchisors, depending on their market sectors and requirements of their customers. It can be a minefield trying to compare one franchise with another, so it’s important to ensure you make accurate assessments and compare like with like.
Viable and profitable
In essence, a good franchise package should be fair to both parties and protect franchisee and franchisor. It should equip a new franchisee to create a viable and profitable business by following the franchisor’s tried and tested formula and, at the same time, safeguard the interests of the franchisor and the network as a whole. The individual components of the package are detailed in the franchise agreement and comprehensively explained in the franchisor’s operating manual.
Ideally, from a franchisee’s point of view the package should encompass training and ongoing support, including IT software support and maintenance; topic specific seminars and refresher training; necessary equipment; regular two-way contact between franchisor and franchisee; access to financial advice and planning; local launch marketing support; national marketing and PR; access to specialists in different disciplines where necessary; access to other franchisees in the network; and a regular conference for the network.
Prospective franchisees must also have a clear understanding of their commitments to the franchisor and ensure they will be able to afford the initial investment and any ongoing management fees. It is very important to check carefully the financial implications of buying a franchise and, realistically, how much money is needed to cover the early days while the business is being built up.
By the time you start to narrow your choice of possible franchise, you will have a great deal of knowledge and know the right questions to ask at the initial meeting with the franchisor. You must understand clearly your responsibilities and obligations, as well as those of the franchisor, before making a binding commitment. You also need to ensure you will get good value for money for your investment and that your part of the bargain is reasonable.
The meeting is when the franchisor explains in more detail about the business, its sector, marketplace, history and vision for the future. It is an opportunity for potential franchisees to ask questions, as well as for the franchisor to quiz the franchisee, and enables both parties to assess how well they could work together. ‘Chemistry’ is not an exact science, but judging the initial interaction is a good indicator of how well - or otherwise - the franchise partnership could work.
Take your time
Some franchisors reveal more than others, so don’t be surprised if you are asked to sign a confidentiality agreement at the outset. Following the initial meeting, you should have a much better understanding of what the franchise involves and your suitability.
In my own franchise, we encourage further meetings - as many as the prospective franchisee feels necessary to understand the business. We recognise that buying a franchise is a big step and one that should not be undertaken lightly, so we like people to feel comfortable and go forward at their own pace.
Don’t be pressured into buying - if the franchisor is in a hurry to take your money, it should set alarm bells ringing. If you have to reach for any part of the business to make it fit, it’s probably not for you.
Take advice. Make sure you engage a specialist franchise lawyer, choosing one from the British Franchise Association’s list. Don’t be tempted to use your general family solicitor, who is unlikely to understand the whys and wherefores of franchising and be able to advise you properly. A specialist will guide you through the franchise agreement and has the experience to identify things that need clarification.
Be sure you understand what it is you’re signing up to and check the package carefully because different franchisors’ priorities vary so much. For example, if you lack confidence in a specific area of the business that is vital to its success, make sure you air your worries to the franchisor and get the help you need.
Love what you do
It may sound obvious, but I strongly caution anyone to avoid buying a franchise that they don’t think they would enjoy. Someone with a good business head who hates being ‘front of house’ is unlikely to thrive in a high pressure selling environment. The right training can overcome this to some extent, which is why it is important to understand precisely the amount and intensity of the training on offer.
Check the frequency of ongoing training provided once the franchise is up and running and whether it includes regular network meetings and a franchisee conference - always a popular and useful event and also a great opportunity to learn from colleagues.
People go forward optimistically, but sometimes things can go wrong unexpectedly. If you have to deal with a real emergency, you must leave your franchise in a safe pair of hands, so ask how much support and practical help the franchisor could provide to help keep your business going. Most franchisors are very sympathetic when disaster strikes and, within reason, will do what they can, but again their contribution is very variable. It might be prudent to invest in specialist insurance to cover such eventualities.
If you need financial advice or help with business planning, your franchisor would put you in touch with an independent specialist. Generally speaking, advice on financial matters for individual franchisees is not covered in the package, as this is deemed to be the franchisee’s responsibility.
Many franchise packages include a range of centralised services, such as buying arrangements with approved suppliers offering heavy discounts to franchisees. Then there is the advantage of saving money on promotional design by being able to access a centralised range of template marketing materials that franchisees can use in their own local areas.
To sum up, if you’re thinking about buying a franchise consider carefully all the implications and make sure the package you buy is the right one for you. Get the best professional advice you can to guide you through the agreement. Then, with confidence, join the thousands of people who’ve taken the same route to success and now enjoy the independence of being their own boss.