Does anybody wake up in the middle of the night shouting about wanting to become a franchisee? I doubt it!
Franchising is not always (or ever) the easiest thing to get into:
Where do you start?
Who can give advice?
What business do you open?
Who’s done it before?
What were the results?
The essence of good franchising is you’re ‘in business for yourself, but not by yourself’’.
You get all the benefits of ‘corporate’ head office support and you’re part of a network of people who can swap/share best practice, advice and insights.
The franchisor should provide proven operating methods, know-how, corporate identity, trade-marks and help with everything from marketing to recruitment.
They are there to offer guidance and advice, but also training, marketing tools, programmes and collateral, plus support in all business areas – including procurement (if relevant), technical, finance, business planning and sales throughout your period in the franchise.
But with over 900 business format franchises in the UK, how do you select the right franchise?
It can be difficult and confusing and is definitely something that not to be rushed.
You need to put time and effort into the research and rest assured the effort will lead you to meet with your chosen one or two franchisors.
Over 22 years in franchising has taught me that there are essentially six steps that need to be covered in selecting the right franchise.
Step 1 – assess suitability
A good franchise should have:
- A proven business history
- Documented systems
- Effective training
- Security of tenure
- Ongoing support structure
- bfa Membership
Step 2 – investment
A franchise is an investment – it is not a job! You need therefore to determine exactly how much you need to invest and most importantly how much you’ve actually got.
There is no point taking on a business that will only generate half of what you need.
Also beware of over extending yourself – be sure you can raise the requisite funding and make the repayments through the business.
Franchising does mean you have to invest – not only time and energy, but also money. However you’ll be amazed just how much you have got.
- Bank/building society savings
- Savings plan or shares
- Mum, Dad or other relatives
- Could you sell your car? Property? Cat?
Step 3 – research the industry
Evaluating a franchise is all about asking questions – the right questions and lots of them.
When considering which industry to get into ask yourself the following:
- Is it a good market?
- Can demand be sustained?
- Is the industry growing or declining?
- Do a few key players dominate? If so, do they compete aggressively?
- How do competitors build market share?
- Do other industries have products and services that could make inroads into this one?
Step 4 – compare the franchisors
Hopefully by now you will have found a number of franchise companies who have successfully cleared the first three ‘hurdles’.
That is they have proven history, good systems, effective training, bfa membership etc; they all are businesses you think you may be interested in and have some or most of the skills required; the investment required is within your compass; and the industry meets your specification in that it’s large, growing and sustainable.
Now you need to compare and judge each opportunity.
Analyse each franchisor
Check with the bfa, Companies House, franchise magazines, and ask the following:
- Are there other franchisors in the industry? If not, why not?
- Is your preferred franchisor the largest operator? A key player?
- Are they an insignificant newcomer but with a brilliant new slant?
- Do they offer the best package to you as a customer?
- How often does a consumer buy the product or service?
- Do the products or services enjoy repeat business?
- What is the typical value of a sale – and the typical profit?
- How many customers would you need to meet your minimum business projections?
- Does this franchisor seem profitable?
- Does this franchisor offer the best potential for growth?
Speak to franchisees
Most franchisees are more than willing to talk about their business, why they joined the franchise, what their aspirations are and how they’re doing.
10 key questions for franchisees
Are you making money?
Are you working long hours?
Do you get on with the other franchisees?
Has the business affected your family life?
Does the franchisor offer good support?
Are you lonely?
Do you enjoy the business?
Is the business giving you what you expected when you first came on board?
Is your family still supportive?
If you knew what you know now would you still have joined the franchise?
Step 5 – seek advice
It is imperative that you take professional advice when thinking of buying into a franchise business.
A qualified professional adviser will assist you in understanding the small print to assess the opportunity and to prepare a business plan.
The Franchise Agreement is a legal document and a specialised area so seek a solicitor with proven experience in franchising.
A good accountant (reputedly rare than a duck billed platypus!) can advise on how to set the business up, tax implications, business planning etc.
Step 6 – make a decision
Ask yourselves 10 final questions:
- Do your strengths and weaknesses match the success criteria?
- Can you really afford the business?
- Is it a good investment?
- Will the ongoing rewards meet your expectations?
- Is there potential for expansion?
- Can you take the pressure?
- Are you confident in the franchise company?
- Are you going to enjoy yourself?
- Are you prepared to work very hard to achieve success?
- Will you follow the franchisor’s system?
If you answer Yes to all the above then you are ready for the next stage which is meeting the franchisor and the second of our questions
How do you prove to the franchisor you have the where-with-all to run their franchise?
Certainly the franchisor will be interested in your background, your experience and your own skill base.
But more than this the franchisor wants to know that you are serious – serious about franchising and more importantly serious about their business.
If you have gone through the six steps detailed above then you need to tell the franchisor this – explain the research you’ve undertaken and the results you’ve unearthed.
Franchisors like you to ask them questions as it shows them you’ve done some work and again are serious about moving into franchising.
Ask about the following:
- Ask for three years of reports and accounts.
- Question them on the market and market trends.
- how long have they been in business/how successfully?
- What is there plan for the future?
- How do they see the business developing over the next 3-5 years?
- In your mind are they a serious player – or full of platitudes?
- Ask to see detailed support plans
- Examine the company organisation chart
- Check whether you forced to buy company product
- Do they have the manpower and intellect in each key business area?
Naturally you will want to speak and/or visit some of their franchisees – ask if you can see anyone or are there restrictions?
Get a copy of the franchise agreement – the franchisor won’t change the document to suit you but you need to be aware of its contents.
Finally, the franchisor will want to know how you anticipate running the business day to day and what your thoughts are on building the business.
Show the franchisor that you are serious by preparing some notes on how you would grow the business.
So, what is a franchisor looking for in a franchisee?
In essence we have covered this throughout the article but it is useful to just summarise the key criteria a franchisor looks for in a prospective franchisee.
- Serious about franchising and serious about their business
- A ‘people person’ – they have personality, charisma and are comfortable dealing with people at all levels
- Good communicator – both 1-2-1 and in a group
- Most franchise businesses call for an interaction between the franchisee and customers and franchisee with suppliers – as such someone who is a poor communicator, doesn’t look people in the eye, cannot engender rapport is probably going to struggle.
- Strong work ethic – few franchises are 9-5 and even fewer can be classed in the traditional sense as a ‘job’.
- Organised – if a ‘normal’ job can be described as 2-dimensional then being a franchisee is 3-dimensional – so you need to be organised.
- Complementary skills – everybody has skills – but the franchisor will want to ensure that your skills and experience are a good match for their business
Different franchisors have different ways of evaluating prospective franchisees and some may extend or reduce this list but in my 18 years in franchising these are the things I examine.
Finally, there is one element that is difficult to evaluate, analyse or even anticipate – but is the cherry on the cake – and that is passion!
I’ve often found that a person with a passion for life, for business, for success – a person with in-built drive – is the person who will succeed more quickly.
I hope the above help.s