Read this expert advice from the british franchise association first
Paul Stafford of the British Franchise Association highlights the key areas to consider and questions to ask yourself before you make a commitment
Nowadays, franchising presents a variety of possibilities across an eclectic mix of industries. With some 1,000 brands using the model in the UK, there really is something for everyone and every budget. But how do you go about narrowing down your choices?
If you are thinking about buying a franchise, you should make yourself aware of exactly what is involved and learn how to identify those businesses that best suit your needs. Making sure franchise opportunities are what they appear to be is absolutely critical, so here are some of the key areas to consider and questions to ask yourself:
MEMBERSHIP OF THE BRITISH FRANCHISE ASSOCIATION
The bfa accredits franchisors using a stringent set of criteria based on operational procedures, franchisor/franchisee practices and the European Code of Ethics for Franchising. All members are listed on the bfa’s website to allow potential franchisees to determine which ethical franchisors have passed these checks - not all do.
Levels of investment range greatly, from smaller amounts you may already have available, to larger amounts you may need a bank loan for. Assess and understand, from the beginning of your process, what you can afford to invest and how much you are prepared to borrow - and remember to consider working capital requirements while your business is establishing itself and may not be turning a profit.
The bfa recognises HSBC, Lloyds, RBS/NatWest, Barclays and Metro Bank as specialists in franchising. Make sure you ask for their franchise departments from the outset.
You must be happy with the commitment needed to make your new business a success. Franchising enables you to develop your existing skill set or become your own boss doing something you are passionate about but inexperienced in with full support and training, so think about what you are good at and can take on wholeheartedly. You also need to consider the support and understanding of your friends and family, which some franchisors like to gauge as part of their recruitment process.
There are a host of professional advisers accredited by the bfa that specialise in franchising who can be invaluable in making sure you’re taking the right steps. For example, when it comes to reviewing a franchise agreement, make sure you go to a specialist franchise solicitor - it can save you a lot of money in the long run.
Your research into a brand is crucial to finding the right franchises for sale. Be thorough and include the following:
• Speak to existing franchisees. You want an extensive list to choose from, not just a few the franchisor provides you information for. Speak to both successful and any less successful franchisees to give you a rounded view. If you can, visit them at their place of work. In some networks you will be encouraged to spend the day with franchisees as part of the recruitment process.
• Understand the business. Make sure you understand all the business operations and what is involved on a daily basis.
• Training. Be sure the training provided, both initially to get you up and running and on an ongoing basis to help your business grow, is sufficient for you to be able to gain the skills required to operate successfully.
• Ongoing fees. Franchisors charge an ongoing management service fee, which will usually be collected either as a percentage of turnover or through the supply of the raw materials you need to operate. Ensure you understand the structure and level of fees and what you get in return. These fees fund the ongoing support you receive and the future development of the business.
Although in some cases management service fees can be a flat sum per month, there can be a clear advantage to fees based on a percentage of turnover - the franchisor is encouraged to help you succeed, as your success will mean their success.
• The people. Don’t underestimate the importance of meeting the people involved at head office, finding out who you would be in contact with and what their experience is.
• Success rates. Ask for success rates of other franchisees. There may be failures, but the important aspect is to understand why.
• Recruitment. If the franchisor doesn’t appear selective about who it recruits, walk away. You want to see it is stringent in its process, not just letting anyone and everyone join the network whose brand you will be trading under. Investing in a franchise should be a two-way recruitment process.
Finally, take your time. Make sure you assess and reassess everything as part of your research before you fall in love with a concept and a dream. You’re parting with your hard-earned money and making a commitment for several years (usually five at a time), so it’s essential to be certain rather than making an expensive mistake.
A good franchisor won’t pressure you into a decision, as it understands the level of undertaking required and will want serious people to join its network.
Visit the www.thebfa.org, for objective advice, tips and information, as well as a list of all accredited member franchisors and advisers.