How to choose the right franchise

Scouring the market for a franchise? Rob Tiffen, senior associate at Birketts Llp, provides some proven steps to success

Choosing the right franchise can be daunting. There’s a large range of opportunities right across the business spectrum and it’s difficult to know where to start when deciding which will be the right one for you.

Based on my experience of seeing what happens when things go wrong, here are some tips for potential franchisees currently scouring the market:

IDENTIFY YOUR OWN SKILL SET

A useful exercise for a franchisee is to try and work out their skill set. This will help narrow down the range of franchises you consider to those that more closely match what you are good at.

Are you customer focused and want a leading role interacting with your customers or clients? Or is your strength managing a team of excellent, motivated staff? Do you have a technical mind? Have you extensive front of house experience or back office knowledge? Are you suited to a business that operates outdoors? Do you need a business that gives you a degree of flexibility? Answering these kinds of questions will help you identify which franchises might suit you.

Maybe the most important question for a would-be franchisee to answer is, what excites you enough to get you out of bed in the morning? If you can answer that honestly and find a franchise that’s in that space, it can be a very good starting point.

DO YOUR RESEARCH

As there are so many franchises out there, it’s important to look at the market thoroughly. Check the British Franchise Association website to see what areas its member companies operate in and, if you have already identified franchises you like the look of, whether they are full, associate or provisional members.

In addition, look at the different franchise magazines and attend one or two franchise exhibitions. This can help make sure you’ve taken a wide view of what’s available in the market.

THE FRANCHISE BRAND ITSELF

Once you have produced a shortlist of franchises, you then have to research the franchises themselves. Here are some of the areas you should be looking at:

• History. In simple terms, how long has the franchise been trading? It’s important to distinguish between the business itself and its franchise operation. Some companies develop a franchise out of an existing business, in which case it may have traded the main business for a while, but the franchise offering could be new and therefore more risky. Be clear on this.

It isn’t necessarily a problem if a franchise is new, but make sure you are confident the information the company is giving you is accurate, particularly any financial estimates. You can be more confident in a franchise with a longer trading history, but find out how successful it’s been.

• Training and ongoing support. The best franchises are those where the franchisor and franchisee understand that they stand to make more money if the franchisor supports the franchisee throughout the lifetime of their business. This begins with proper training in the franchise system and continues with ongoing training and support.

Good franchisors will have head office or regional staff who can help a franchisee with their business plan every year and work hard to help the franchisee - and therefore themselves - earn more money. Be thorough with your potential franchises about what they offer in this area.

• Success stories and openness. A franchisor should actively encourage you to speak to its existing franchisees about what business life is like on a day-to-day basis.

One of the best and most successful franchises I have worked with gives a potential recruit a directory of its entire network and tells them they are free to call any of the existing franchisees. This openness and transparency about how its franchise network operates means an individual gets an accurate and clear view of things to help them make their decision.

Some franchises advertise examples of success stories of franchisees within their networks. These are excellent if they are genuine, but be careful of any efforts by a franchisor to cherry-pick particular franchisees for you to speak to. This might suggest that franchisees who have perhaps had problems with the franchise are being hidden from view. Be wary of a franchisor that’s reluctant to let you speak to any of its existing network at all.

• Consider a resale. It’s worth looking at the franchise resale market. These will be existing, established franchise businesses where the franchisee wants a career change. Usually they want to move on due to a change in their own circumstances, such as retirement.

This can be a good way to take on a business without having to start from scratch in a virgin territory. A resale isn’t right for some people and many franchisees like the challenge of building their own business in their own territory from the ground up. However, for others a more established business can work better for their skill set, background and ambition.

A FRANCHISE IS A BUSINESS, NOT A JOB

The most important advice for any potential franchisee is that they must understand they are buying a business and not a job.

I’ve experienced lots of franchise disputes where the fundamental problem is a mismatch between the franchisee’s expectation of what they were required to do and the demands of the franchise system.

This can mean long and sometimes unsociable hours. It usually means having to focus on the marketing and business development of the franchise. But it also means the rewards from building a successful business are greater than if they were working for someone else.