It takes a particular type of person to be able to run a successful business. Many aspiring business owners fail to achieve their dreams of becoming the boss because they don’t believe that they have the right skills or abilities. This is where the role of a franchisor comes in.
Why buy a franchise business?
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Buying a franchise business allows you to benefit from a tried and tested system with a proven track record of success. The franchisor will have worked hard for many years to build one of the most profitable franchises, and you’re able to take advantage of this as a franchisee.
The best franchises to invest in will have developed comprehensive operations manuals and training programmes that cover marketing, operations, accounting, technology and other areas that are specific to your franchise. These are the elements of a franchise that are created to enable you to earn more and spend less time building your new business up compared to if you were starting an independent business from scratch.
There’s no denying that there are many benefits to the franchise model, but how do you tell the good franchises from the bad?
What makes a good franchise?
Unfortunately, not all franchise opportunities are equal, and some are undoubtedly better than others. This is why it's vital that you perform due diligence to truly understand the franchise before you sign the franchise agreement.
But as a starter for 10, here are some sure signs that you’re considering a good franchise:
1. The franchise offers a product or service that’s in demand.
2. The franchise concept is unique and therefore has a competitive advantage over other businesses within your area.
3. The franchisor has proven the concept of the franchise and has the financial and performance data available for review.
4. The franchise territories are exclusive, so you don't have to worry about competition arising from other franchisees from within the network.
5. There is a high level of pre-launch support in place.
6. You have access to a comprehensive initial training programme to ensure you have all the necessary know-how to become one of the most profitable franchisees.
7. There are detailed operations manuals available.
8. The franchisor is a member of the British Franchise Association, proving that they are both ethical and credible.
9. The franchisor is committed to developing and growing the brand.
10. The franchisor is dedicated to providing ongoing support and guidance to help you develop your business.
However, just because a franchise is good, it doesn’t mean that it’s one of the best franchises to invest in for you.
A Guide to Choosing the Perfect Franchise
The only way that you can be sure that buying a franchise business is right for you is to do your homework. This way, when you do come across a franchise opportunity, you'll have the information and confidence to know whether it's the perfect one for you.
Here is a due diligence checklist that you should work through if you’re considering becoming a franchisee:
• Have a thorough understanding of the market. Sign up to industry newsletters, check out the British Franchise Association website and look at attending franchise exhibitions in your area.
• Spend time within a franchise business. Approach a franchisee that you know and ask if you can shadow them to get a proper understanding of whether it’s the right route to business ownership for you. Also, use the opportunity to ask them plenty of questions about franchising.
• If you don’t know any franchisees, ask the franchisor to give you a list of their active franchisees. The best franchises to invest in are the ones that are happy for you to discuss the opportunity with their franchisees. If the franchisor refuses or attempts to cherry pick who you speak to, this should serve as a warning sign that not all is as it seems.
• Review the financials that the franchisor has provided and then validate these with your own projections. Consult an accountant that has experience in dealing with franchises to verify your assumptions.
• Gain a full understanding of all the fees that you’re obliged to pay as a franchisee. Remember that the cost of a franchise is more than just the franchise fee. Review the franchise agreement with a solicitor that specialises in franchising so that they can advise you on whether the initial and ongoing costs are fair and proportionate to the amount of support you'll be receiving. The most profitable franchises are led by franchisors that understand that it’s just as important that you’re able to make money from the franchise as well as it is for them.
• Perform a self-assessment to consider if you have the right personality traits and skills to become a franchisee. Franchising is no guarantee of success. It takes hard work, dedication and determination. The more effort you put into a franchise, the more likely you are to succeed. If you were hoping for an easy ride, then perhaps buying a franchise business isn’t right for you.
• Make sure that you have the necessary finances to fund the franchise in the early days. It's often a requirement of becoming a franchisee to show that you have money available should you need it at the beginning of your franchising journey or when times get tough. Speak to existing franchisees to find out how long it took them to break even. This should help you to calculate how much working capital you’ll need while your business is becoming established.
• Set realistic goals. Running a franchise can be extremely lucrative, but the amount of money you can make depends on many factors. The industry you've chosen, the size and location of your franchise, the amount of effort you put in – all of these, and more, will impact how profitable your business is. Be sensible with your financial targets from the start, and you'll enjoy being a franchisee a whole lot more.
If you’ve worked your way through this checklist and you're still confident that you want to become a franchisee, then you're well on your way to finding the perfect franchise.
Questions to Consider When Choosing a Franchise
Is franchising right for me?
This is, of course, the first question you should ask. There are countless benefits of the franchise model, which encourages entrepreneurs to start a franchise rather than an independent start-up. Whether it’s that they can operate under an established brand name or that they are supported by an experienced franchisor, franchises generally offer a less risky route to business ownership.
With that being said, some people’s personalities don’t suit being told what to do and not having compete control over operational processes and the direction of the business. So, if you want to do things completely your own way and be in charge of what all your money is spent on, it’s probably best to start your own business from scratch.
What are my biggest strengths?
Think about all of your greatest strengths and how you can use them to run a successful business. Just because you are starting a hair salon franchise, it doesn’t mean that you have to have years of experience as a hairdresser. You could take more of an overseeing role and focus on the growth of the business, leaving the cutting and blow-drying to the professionals. The trick is outsourcing or delegating positions effectively.
You can’t be an expert at literally everything, so outsource functions that need specific expertise and focus on motivating staff.
What do I want to achieve?
All entrepreneurs have their own personal reason for wanting to start a franchise. Think to yourself whether your main goal is spending more time at home, having greater flexibility over your working schedule, taking an entrepreneurial leap or earning as much money as possible.
This may sound obvious, but being clear of your exact reasons for choosing to franchise will help you invest in the perfect franchise for you.
What is my budget?
The costs of franchises vary drastically, so make sure you are confident how much money you are able to invest into the franchise. You should balance the initial investment costs against the expected return, your predicted income and lifestyle.
Have I researched the field enough?
Before you can be sure that a franchise is the perfect one for you, you need to have researched the field in great depth. But before this, you need to be sure that franchising in general would work well for your personality.
The Most Profitable Franchises to Start in the UK in 2019
Click here to see an extensive list of the most profitable franchise opportunities in the UK in 2019. One of the exciting opportunities in our books looking to expand its UK franchise network is Clubs Complete. The child care and activity provider franchise requires a minimum investment of around £3,000 and a total investment of around £10,000.
Becky Martin, Point Franchise ©