Research your franchise options to avoid the pitfalls, says Richard Holden, head of franchising at Lloyds Banking Group
It’s not hard to see why people are choosing franchising as their preferred way of setting up in business.
With an established franchise you are investing in a tried and tested business model - and a recognised brand name. You’ll have the comfort of knowing the franchisor will have piloted the business and proven over time it can be successfully replicated. Unless of course you’re the first franchisee, there will be other franchisees operating, proving it works and giving you a track record to judge.
A major benefit of a franchised business is that the franchisor provides initial training and ongoing support to the network of franchisees. But before you take the plunge, it is worth noting that not every franchise offers the same level of support, so you’ll need to find out what is on offer before signing on the dotted line.
Recently a franchisor asked me to follow him from head office to a local outlet to see how the business operates first hand. I told him I didn’t know where to go, so he instructed me to follow him. He then drove off at speed. Following in my own car, I did my best to keep up with him. Not only did he seem to have no consideration for the fact I was trying to follow him, but through several roundabouts and junctions he never indicated once. This seemed to be a perfect metaphor for his management style - no indication of future direction and a lack of consideration for those he was meant to be leading.
In my experience, successful franchisors are good with people. They are usually approachable and get the best out of individuals and their networks by being good at listening, giving clear direction and providing appropriate and timely feedback. They need to be firm but fair and make clear decisions that bring their franchisee network along with them on their journey. Some of these attributes come easier to some franchisors than others.
I hear numerous stories of investors who jump in to a franchise opportunity without carrying out sufficient investigation beforehand and later regret their investment when all is not as it first appears. Research must be thorough and don’t be pressured into making a decision before you are ready to do so. As part of your research, speak to as many existing franchisees as possible. It is likely that the franchisor will want to manage that process - and that is fine - but don’t let them cherry pick who you speak to.
You should try to speak to a selection of franchisees, including some of the best and worst performers. You may also wish to speak to someone who has recently established their business - they will have gone through the same process as you very recently, so their experience will be invaluable. It’s also worth speaking to franchisees who are more established. They will be able to point out some of the pitfalls to avoid and where you can expect your own business to be in two or three years time.
Of course, franchising is not right for everyone. For people who value independence, want to run a business without restrictions or reinvent the wheel, franchising might not be the right choice for them. Franchising is not an easy business option and investors need to go in with their eyes wide open. Ultimately, if you’ve done your research, considered all the alternatives, taken the right professional guidance and decided that franchising is the best way forward for you, there is every opportunity to benefit from your chosen franchise for many years to come.