Advice on researching franchise opportunities

With so many franchisors recruiting in the UK, thoroughly researching a business before you invest in it is more crucial than ever, says The British Franchise Association

You wouldn’t take a job without knowing something about your prospective employer or what your role might entail. You would never be able to start a business from scratch without giving some thought to the goods or services you aim to sell. Likewise, investing in a franchise without carrying out research into the franchisor and its business wouldn’t be the wisest thing to do either.

Franchising has many benefits. The combination of a local company backed by national support, standards and economies of scale is a proven way to do business, and one that benefits both the franchisor and consumer. However, it’s only careful research that ensures the right people are matched with the right businesses.

Franchising is a wide and varied industry that encompasses low investment businesses that can be run from home through to major, internationally recognised brands. Today you are just as likely to find a franchise operating in the child entertainment, accountancy or recruitment market as you are to find one in lawn care, fast food or printing. This vast array of businesses means you are spoilt for choice, but many will not be right for you. In fact, franchising may not be suitable for you at all. To help you decide, read on.

Enterprising or entrepreneur?
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Franchisors look for enterprising people who can take a proven formula and maximise its potential. A franchisor has invested a lot of time and money into establishing and proving its system and will not take kindly to someone changing it. If you always want to do things your way, franchising might not be for you.

Financial commitments
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You need to consider how much money you can commit to a franchise and the level of return you require on your investment. Speak to one of the British Franchise Association accredited franchise banks about securing finance and talk to existing franchisees to get a better gauge of the realistic earnings potential in the network - not just what the maximum is.

Your time
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Franchisors provide training and support systems to make starting your business more straightforward and successful than a non-franchise start-up. However, it is still a new business, which requires hard work and commitment to get off the ground. You need to be confident you can commit time to the franchise and that friends and family are supportive of your venture.

Your goals
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Some people will take on a franchise with a very clear plan of how long they wish to run it and when they want to sell. However, many will not have thought about their long-term goals or exit strategy. You may find a franchisor will ask you about this during the recruitment process.

Finding a franchise
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The internet is nearly everyone’s first port of call when researching anything today, and franchising is no different. Sites such as www.thebfa.org provide a huge resource of help and advice, as well as details of businesses that have passed a strict accreditation on their franchise operation.

The traditional media is still an important part of franchising, with magazines and newspapers providing excellent resources for advice and access to companies. There are also professional agents that help match franchisees with franchisors. In addition, the bfa works with an exhibition company to provide standards-based franchise exhibitions. These events provide good opportunities to meet franchisors, access free seminars and talk with professional advisers.

The bfa tends to list these events on its website, along with access to free tickets.

What you’ll do
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If you’re scared of dogs, don’t invest in a pet care franchise. If you hate getting your hands dirty, don’t consider a cleaning franchise. This may sound obvious, but you need to think about what you are happy doing on a daily basis. Individual franchises work differently, so it is beneficial to visit a franchisee to get a clear understanding of what the business involves.

Matching your skills
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Linked with the previous point, it is worth thinking about your strengths and weaknesses. Some franchises will require you to adopt a management role, while others demand a significant amount of time on sales or cold calling. These are skills that can be transferred from previous experiences, but are worth thinking about when speaking with franchisors.

Professional advice
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There are a host of professional advisers accredited by the bfa who specialise in franchising. When it comes to reviewing the franchise agreement, make sure you take advice from a franchise solicitor. Solicitors that aren’t franchise specialists will waste a lot of red ink - and your money - only for you to be told the agreement is non-negotiable. Therefore, a franchise solicitor will save you a lot of time and money in the long run.

Franchising has proven itself over the past few years in a tough economic climate. When other businesses have been failing, the franchise industry has grown. However, this is only the case because people are cautious and take time to protect their businesses and personal investments. Don’t rush into franchising. It can provide you with a new level of enjoyment in life, but only if you research your options properly first and are confident about the choices you make.

CHECKLIST
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* British Franchise Association membership. The bfa accredits franchisors using a stringent set of criteria based on a code of business practice and the European Code of Ethics for Franchising. All members are listed on the bfa’s website.

* Speak to existing franchisees. Ask a franchisor for a full list to choose from, so that you are not given details of only the successful ones. If you can, speak to both successful and less successful franchisees - you’ll get a much more rounded view of the business.

* The people. Ask what experience the franchisor has in franchising and what expertise the support people have. You need to feel comfortable they can provide the assistance you need.

* Costs. Make sure you understand the total start-up cost of the franchise and what the ongoing management service fees are. You can’t budget properly if you don’t have the full picture.

* Success rates. Ask for the success rate of other franchisees. There will most likely be failures, but the important aspect is to understand why.

* Recruitment. Ask a franchisor how many franchisees it recruited in the last year and how many it expects to recruit in the next year. You should be comfortable that the growth rate will not have a negative impact on current franchisees in the network.

* Pulse and cheque. Walk away if a franchisor isn’t picky about who it takes on. When you’re running a franchise, you want to know the other franchisees in the network are adding to the value of the brand, not destroying it.