A guide to choosing the perfect franchise

04/07/2018 17:00 | Start a business

Guide to choosing the perfect franchise

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 dont believe that they have the right skills or abilities. This is where the role of a franchisor comes in.

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 youre 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.

Theres no denying that there are many benefits to the franchise model but how do you tell the good ones 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 youre considering a good franchise:

  1. The franchise offers a product or service thats in demand.
  2. The franchise concept is unique and therefore has a competitive advantage over other businesses within your area.
  3. The franchisor will have 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 franchises.
  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 doesnt mean that its one of the best franchises to invest in for you.

How do you know if its perfect for you?

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 youre 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 its the right route to business ownership for you. Also, use the opportunity to ask them plenty of questions about franchising.
     
  • If you dont 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 youre 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 its just as important that youre 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 isnt 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 youll 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 youve 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.

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