Troy Tappenden, managing director of retail franchise Dream Doors, reveals his five tips for franchise success
Investing in any new business can be daunting. And while a franchise provides a far safer route to self employment, it isn’t without its pitfalls.
Here are my five tips to help budding investors assess their franchising options.
Potential franchisees can certainly feel more confident of success when buying an established franchise, especially when that franchise has been thoroughly vetted by the British Franchise Association.
Having the bfa stamp of approval means a franchise functions ethically and is usually very stable. It will have met a whole host of criteria - the business must be sustainable, profitable and transferable - and will have a franchise agreement that adheres to the organisation’s strict code of ethics.
It takes a long time to go through this process and there are plenty of franchisors that don’t meet the bfa’s criteria. Dream Doors is a full member and has been for many years. We’re proud of that and would urge any budding franchisees to look first and foremost at bfa accredited franchises.
Anyone looking at a franchise should consider whether they can see themselves doing the job on a daily basis.
It’s no good buying a van-based business if you don’t like driving And with a business like Dream Doors, in which you’re dealing with customers, suppliers and managing staff, you’ll need to be good with people and well organised.
Running a business is very much a lifestyle choice - it really will take over your life. So it helps if you can find something you enjoy and can get passionate about. It’s also important you have the backing of your family, as the very least they will be doing is supporting you emotionally. It won’t be a great experience every day and you’ll need to be resilient and determined. But if you genuinely like what you do, you’ll be successful and the financial rewards will follow.
Once you’ve narrowed down your selection, take a good look at the support behind the scenes. After all, that’s one of the main benefits of joining a franchise.
If all you get is an operations manual and some telephone support, you need to question what you are getting in return for your investment. Find out how much support is on offer and what happens when the initial training course is over.
At Dream Doors we run a week’s training at head office for new franchisees. But if that was all we did, those franchisees would never get their businesses off the ground. Once they’ve left after that first week, they have regular visits from support managers, quarterly business coaching courses and training from all of our suppliers too. That support continues for the life of their business and is free of charge to all franchisees and their staff.
You also need to ask what motivation the franchisor has for you to succeed. If the franchise fee seems high and the opportunity is front-end loaded, where is the incentive to help you grow? Dream Doors has a management services fee structure that means we only get paid when franchisees make a sale. Put simply, if franchisees didn’t sell, Dream Doors wouldn’t exist. That doesn’t mean franchises with a flat fee aren’t ethical, but when they’re set up that way there is less of an incentive to help franchisees grow their business and generate more revenue.
Buying a franchise from an established brand can help with funding too. The banks are happy to lend to proven franchises and bfa members are more proven than any other franchise. Despite what the press might have us believe, the high street banks are happy to support legitimate franchises and there are various forms of lending available to satisfy all requirements.
The banks trust us to vet potential franchisees. It’s important we bring the right people into Dream Doors and we certainly don’t recruit just anybody. Once interested parties have been screened, passed our initial profiling and met us at head office, they’re usually very strong candidates.
After that, if we’re all happy they then meet two or three franchisees, who will pass feedback to us. If after that we’re still happy to proceed, we then introduce them to the banks. And because we have been through that whole process, the banks know any candidate we put forward has been through a heavy vetting process and encouraged to undertake their own due diligence.
Franchises are more likely to provide a solid income and generate faster returns than going it alone. So if you’re looking to replace a salary, you’ll be able to do that quicker with a franchise.
Of course, you need to factor in the initial start-up phase and in our business plan we show no drawings for the first three months. In truth, many franchisees can draw an income quicker than that, but we err on the side of caution, as there’s no guarantee of sales at that point in the business. But once our franchisees open a showroom - typically three to six months after launch - their turnover increases sixfold and they’re able to draw a decent salary out of the business.
Dream Doors franchisees have sold more than half a million pounds in their first year. Some have netted £100,000 in their second year in a showroom. Our top franchisees are forecasting a pre-tax profit of over £200,000 this year. It would be very difficult for anybody to achieve those numbers so quickly on their own.
What’s even more impressive is that none of these people had any kitchen industry experience. Most hadn’t been involved in sales and hardly any had owned a business before. So buying a franchise can provide people with an opportunity to get involved in a sector in which they have no experience, thanks to the support and brand development from the franchisor.