Philip Ciniglio, ceo of Bartercard UK, reveals the most important questions to ask before investing in a franchise
People choose to purchase franchises for many reasons, but the underlying rationale always remains the same - they want to be in control of their own destiny, in business for themselves and not by themselves.
With less traditional job security available, budding entrepreneurs are fast recognising that franchising offers a lucrative opportunity to not only join a successful and established brand, but to build and manage a business of their own. With this in mind, it’s no surprise that becoming a franchise owner is an increasingly popular choice, with franchise brands growing significantly over the last five years.
A franchise concept operates on the basis of earning fees or royalties, which are invested into building the core business and brand, growing the franchise network and providing technology, business systems plus initial and ongoing training. The franchisee benefits from working with a national or international brand, utilising the support and skills afforded by its experience.
Most people who inquire about franchise business opportunities are usually at a crossroads with their life and looking to make a critical decision about their future. There are many reasons someone might consider becoming their own boss, such as a lack of job satisfaction, lack of opportunities for personal or career growth or wanting to make more money and not feeling their current career can offer such chances.
Whatever the reason behind this potential change of direction, the franchise model’s one size does fit all.
UNDERSTANDING YOUR OWN STRENGTHS AND WEAKNESSES
Before you decide to take the leap and run your own business, there are a number of important questions you must address, starting with your own strengths and weaknesses.
You’ll also need to decide if you want to utilise existing skills or learn something new. If you’re going to make a career change, you’ll not only need to be happy with your decision, but be comfortable accepting your new role and the challenges that may arise as a result.
WHAT DO YOU WANT TO ACHIEVE AS A BUSINESS OWNER?
Once you’ve answered these initial questions, you can begin to consider what you’re looking to get from your new role as a business owner. Is it job satisfaction, independence, money or security you’re looking for?
Will self-employment will suit you? What hours are you prepared to work and what is the extent of the investment you are prepared to make? By considering all the risks, you’ll enter your new business prepared and ready for the challenges and successes that lie ahead.
In addition, you’ll need to consider the risks and benefits of buying into an existing business. Many people come to realise that the franchise sector offers a unique opportunity, as it provides access to a proven business system, defines the required investment and is coupled with training, support and marketing. There are, however, many franchise systems operating across the UK, with varied levels of success and development.
Once you’ve established the answers to these questions, you should be in a confident position to know that franchising is for you and you can begin to focus on finding the right franchise.
DO YOUR RESEARCH
The first step is to research and gain as much information on potential franchises. For example, how long has the franchisor been in business, what are the upfront and ongoing fees and is the brand trademarked and protected?
On top of this, you must check the fine print. The upfront costs and training might look enticing, but as with any contract, there can sometimes be surprises lurking within the fine print. Find out what are the key terms, what the length of tenure and renewals are, whether it is an exclusive or non-exclusive agreement and what conditions must be met at termination and post-termination of the agreement.
Perhaps most importantly of all are the cost implications. Consider everything as a whole, not just the attractive headline prices used to lure in franchisees. Take into account the franchise fee, fit-out and equipment costs, the working capital required, cost of training, plus the cost of opening promotions, legal fees and office supplies.
MORE THAN A BRAND
There are clear benefits of working with a national or even international brand, but it’s not just about the brand name. Find out what is provided to potential franchisees, including the quality of the training and support being offered.
In order to promote the business, does the franchisor deliver any online marketing or public relations support? What defined processes are in place and how can these help franchisees adapt operating procedures? What help will be available to guide you through all these aspects of your new business?
Franchisees should also consider what the brand’s unique selling proposition is. Does the franchisor have intellectual property that provides a competitive advantage and how does the satisfaction of existing franchisees within the system rate?
ASK THOSE WHO HAVE
Take advice, whether it’s legal, business or accounting. Also, speak to existing franchisees and ascertain the level of satisfaction and lifestyle achievable through franchising.
As with any business decision, it may not offer guaranteed success, but by finding the right company and style of business that suits you, franchising can be a much better choice than going it alone.
Joining a franchise can provide you with the support, training, marketing and systems to help you run a successful business. However, it will still be your own venture and ultimately success will depend upon you to make it happen. But with the right preparation, you’ll have the chance to find success in your franchise and business independence for your future.