How To Research A Franchise

Posted: 17 Jan 2018
Estimated Read Time: in about 7 minutes

Do your homework before making an investment, Tim Bowyer, Metro Bank’s franchise business development director, says

How To Research A Franchise

Research suggests that the failure rate of franchised businesses is significantly lower than non-franchised business start-ups, meaning that large numbers of people are looking towards franchising when starting up their own business.

The journey to becoming a successful franchisee can be made easier by applying a few simple rules to the process, taking appropriate advice from relevant professionals and, most importantly, doing your homework.

Risk assessment

A good starting point is to carry out a risk assessment on yourself in conjunction with friends and family. What are your personal circumstances? What are your strengths and weaknesses?

This should help you decide whether to consider an established franchise concept with a considerable number of franchisees or a relatively new franchise with only a handful of franchisees. Both options present different risks.

Once you’ve identified your preferred franchise, it’s vital to visit the franchisor’s premises to see how the business works and talk to those involved in the business.

Make sure you establish what support is available to you during the first challenging few weeks and ask for a list of existing franchisees to speak to.

Prepare a list of questions, such as:

 

  • What is the investment level and
  • what working capital is required?
  • What is the profitability? Beware of generic ‘business plans’.
  • What initial and ongoing training is available?
  • Does the programme include marketing and sales support?
  • Can I have a list of your existing franchisees and visit some?
  • Can I see the franchisor’s latest audited accounts? When you’re reviewing these statements, make sure you seek relevant professional advice to help you establish the profitability.
  • Franchise agreement

    Often you will not be provided with a franchise agreement at the first meeting and may be asked to sign a confidentiality agreement.

    When you do get a copy of the agreement, remember to seek appropriate legal advice from a solicitor who is an affiliate member of the British Franchise Association.

    There may well be other questions you feel fit your own personal circumstances, but what is important is the preparation before you meet your chosen franchisor, as well as the time you take afterwards to review the answers that were given.

    Buying into a proven business format franchise that’s been piloted in the correct way does not guarantee success. Research remains vital. Take your time, involve others and always seek out advice from the experts.

     

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