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How You Can Research A Franchise Online

Posted: 21st July 2017 - Last updated: 7th June 2018

You now know the franchising basics, and why big businesses choose to use this model to expand their companies. But how should you find the right opportunity for you? While national and regional exhibitions, specialist magazines and newspapers continue to provide focused information on the franchise industry and the opportunities it offers, the internet has revolutionised access to traditional hard-to-come-by but essential, up-to-date information.

But online resources are vast and, with no plan on how to access the specific information you are looking for, can be like searching for a needle in a haystack – enormously time-consuming and not always fruitful.

By accurately identifying our own individual abilities, aspirations, preferences and financial resources you can effectively narrow the search to make the process much more manageable and time-efficient.

Around 60% of all new franchisees borrow to
start their businesses

Finance

One of the major factors will be the availability of, and access to, finance. Around 60 per cent of all new franchisees borrow to start their businesses and a clear picture of what you can realistically afford is essential. Costs will include the initial cost of the franchise and working capital to pay running costs until the business achieves its profit targets plus normal household expenses for you and your family.

Preferences

You may opt for a complete career change or decide to utilise your existing skills in a similar industry.

Franchisees with experience of the business sector in which the franchise operates may take less time to train and get going because they ‘know the ropes’. However, they will also know the wrinkles and short cuts, which may compromise the quality of delivery of the franchisor’s service and therefore the brand as a whole.

The experience most franchisors like to see is demonstration of previous success in a job or business related function, maybe even in a hobby or sporting activity, where objectives were set and achieved. Stress your previous successes when discussing opportunities with franchisors and the details may not matter.

While you may find the franchisor recommending which franchisees you should speak to, you should also try to speak to franchisees the franchisor has not recommended

Location

The way a territory is defined, together with the territorial rights granted to a franchisee, are important considerations for a prospective franchisee.

Where the franchise consists of fixed retail premises, the franchisor may designate a territory within which the franchisor will not place other franchisees or operate itself a similar unit. In the case of a mobile franchise, the question of territorial scope becomes more significant, as the franchisee will usually be given a defined area in which to operate.

There are many different ways in which a territory can be defined. The franchisor will need to take great care to make sure the franchisee can clearly ascertain the territory that is being granted. If there is any ambiguity in the description of the territory, it can lead to disputes with neighbouring franchisees, which can be particularly problematic when dealing with a mobile franchise or, for example, a pizza delivery restaurant.

A simple method would be to state the territory is a certain radius from the premises. If the franchisor does not supply a map showing the extent of that radius, the franchisee will need to make further investigations. Possibly, the simplest way to define a territory is by reference to a map, whereby the territory is marked by a line drawn in a specified colour pen. However, problems can be caused in dense urban areas where a thick marker is used and is difficult to ascertain in relation to certain roads where the territory of one franchisee begins and another franchisee ends.

A popular method of designating territories is by reference to postcodes. The main problem with designating postcodes is that they can change. Where this is the case, the franchisee needs to check if they are to operate in the postcode areas granted at the date of the agreement or the postcode areas as they stand at any time during the term. This should be clarified in the franchise agreement.

If the franchisor is a member of the British Franchise Association, you can make enquiries to the organisation

Basic research

There are many ways to research a franchise opportunity and employ due diligence, but sound advice would be to combine as many as possible from the following:

Speaking to existing franchisees. While you may find the franchisor recommending which franchisees you should speak to, you should also try to speak to franchisees the franchisor has not recommended. This should help you get a balanced opinion.

Conducting investigations from information that is publicly available including, for example, the internet.

If the franchisor is a limited company, you could consider obtaining its accounts from Companies House, which may give an indication of its financial performance and stability. An independent accountant or solicitor can also obtain these for you.

If the franchisor is a member of the British Franchise Association, you can make enquiries to the organisation. The bfa is the self-regulating governing body for the franchise industry in the UK. By joining the BFA, members agree to meet its entry requirements, as well as agreeing to follow a code of practice that encompasses the European code of ethics for franchising.

In short, there is no fail-safe way of researching a franchise opportunity, so a potential franchisee needs to be prepared to do some due diligence on the franchisor and its business.

Congratulations on completing the first step in our guide to becoming a franchisee. Continue to step two, where we talk money.

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