Derrick Simpson has some top tips for choosing the right franchise
During my 26 years in the UK franchise community, I have seen and worked with some successful franchisees who have taken on a franchisor’s concept and system and used it to develop substantial businesses. I have also, unfortunately, met many who have not been so successful for one reason or another. What is interesting is that the reasons for these successes, or not, can be distilled into a few key points.
This is my advice for choosing a franchise:
DECIDE ON YOUR INVESTMENT LEVEL AND STICK TO IT
Do not overspend on a business venture. Invest to the level you can afford, always include some negative ‘what if’ planning in your calculations and keep some money back for the unexpected events that may come along later.
MATCH YOUR INCOME REQUIREMENT TO YOUR INVESTMENT
While the ideal opportunity is to be able invest £10 and earn £100,000, reality isn’t like that. So ensure the business you are looking at can realistically provide you with the income you require.
CHECK THE FRANCHISOR’S PROJECTIONS
The ideal situation is that the standard projections provided to you by the franchisor represent the average performance for the existing businesses in its network. Some franchisors, however, may project the top performers’ results, while others may try to illustrate what could or should be attained. Make sure you know what the figures represent and that you understand how they fit with the reality of the network’s performance.
PLAN YOUR LONG-TERM GOAL AT THE OUTSET
Part of the planning for your opening and launch is to establish your eventual exit route. Consider what is your final goal for your business - whether to sell it, pass it to your offspring or run it until you drop. Each will have a major effect on how you structure your business plan at the outset.
PLAY TO YOUR STRENGTHS
Different types of franchise require differing skills. Some are direct sales based, some are retail service, while others may have a consultancy approach. Ensure you match your skill set and personality to the style of business you are investigating. Your basic personality traits and inherent skill set will remain with you and will influence your performance.
RESEARCH THE MARKETPLACE
The internet provides countless pages of information on virtually anything, so ensure you have looked thoroughly at the environment and marketplace for the business you are considering.
SIMPLE IS GOOD
A business that is simple to operate with structured systems will be easier to run than one with nebulous concepts and where you are left to your own devices to drive it forward. A simple business will also be easier to sell on to a new owner when the time comes for your exit for exactly the same reason.
CONSIDER A FRANCHISE RESALE INSTEAD OF A NEW START-UP
An existing business will give you that vital cash flow from day one, a local brand presence and, if appropriate, staff who know how to operate the business. It may cost a little more, but the benefits usually outweigh the cost.
BRITISH FRANCHISE ASSOCIATION MEMBERSHIP
While not being a guarantee against all risks, a franchisor that is a member of the British Franchise Association has at least gone through a thorough vetting process to attain the standards required by the organisation. That doesn’t mean you can dispense with the other checks, but it is a good place to start.
DON’T TALK TO NEGATIVE PEOPLE
For me, this is an important point. You are going into business with your money, your effort and at your risk. Stay away from negative people who drain your self confidence and cast doubts on your dreams, efforts and abilities.
To be successful in business you need to be constantly positive and forward looking. Remember, it is you who every morning has to drive your business, motivate your staff and reap the rewards of success. Don’t let others take that away from you with negativity and bad advice.
Follow these few simple guidelines and you will have a good chance of making the right franchise investment decision and growing a successful business.