There are so many franchises to choose from that it can be a little overwhelming. In order to help you out, we've compiled this brief guide to choosing the right franchise.
But first, we look at the advantages and disadvantages of starting a franchise so you can be confident that you are making the right decision. Whilst choosing the right franchise in the right sector is incredibly important before that is making sure that franchising is the best business move for you in the first place. Whether it’s checking you’ve got the right personality for it, or the appropriate funds, there are many factors to consider before you take the plunge.
Advantages of Starting a Franchise
There is sometimes a perception that becoming a franchisee and being a small business owner are the same thing. While some concepts may be the same, there are slight differences. Let’s look at the benefits of starting a franchise over running a new business.
Operate under an established brand that is already well known
The business model, concept and operational processes have already been tried and tested, and most likely successfully replicated, in a number of other locations. This takes much of the risk out of starting a business.
As the franchise is already established, you won’t have to spend as much time and money on building the brand. It should already be known and trusted by potential customers. Even if you launch in an area where the customers haven’t heard of the brand, the fact that they can go online and see reviews from customers in different locations around the UK will help reassure them it’s a less risky decision.
More security and support
Franchisees usually have access to a comprehensive training programme and receive ongoing support in numerous aspects of the business, including managing staff, business development and maximising sales. This, and the fact that you are operating under an established brand, makes it a more secure option.
Connections in the industry
When you start a franchise, you can make the most of the franchisor’s already established business relationships with supplier and marketing teams.
Disadvantages of Starting a Franchise
All financial information is transparent and available to the franchisor
Unlike running your own private business, you’ll need to share financial information with the franchisor. It helps them determine if your branch is making sufficient profit to sustain all operations over the next few years. They’ll be able to use these details to give you further advice and support.
Operating costs may be high
While some franchises require a low to medium investment, you might need some capital or operating funds for the day-to-day business. If you’re leasing an office or building, you’ll need to cover rental fees. Until you are well established and obtain steady revenue, you may also need to pay wages. It all depends on what’s included in the franchise agreement.
Having to use certain suppliers
Of course, when you are running a business, you want to keep costs as low as possible. One way this can be achieved is by finding the cheapest suppliers, which in turn will reduce your overheads and maximise profits.
However, when you run a franchise, you will normally need to use the supplier that the franchisor chooses. Not only is this a lack of control, but also lowers potential profits.
How to Choose the Right Franchise
When searching for the right franchise, you need to perform adequate research and determine if the business meets your long-term interests. But how do you know what to look for and consider before selecting one? Here are some criteria to help you choose.
Assessing Your Skills and Interests
Do you have a passion for a specific business or industry? The primary reason is that running a franchise becomes a long-term business. The last thing you want is to be involved in an industry for that long when you have no interest in it. You’ll lose the desire to meet your goals.
You’ll also have to invest a lot of time, money and energy into your franchise. It would be a waste if you spent so many years on something you don’t have a passion for. It especially helps if you have extensive knowledge, skills or experience in that field, as it means you’ll excel above the competition and other franchisees.
Having said that, you don’t need to be an expert in everything in that industry. If you have the right team and support, you can easily delegate tasks to those who have more knowledge about them. What’s important is that you have the passion and drive to make the franchise succeed.
What are your Personal Goals?
If you’re considering buying a franchise, the first step is self-evaluation. What do you want? What do you want from your business? What is your priority – financial stability, flexibility or the challenge of running your own business? Everyone gets into franchising for different reasons and it’s a good idea to understand your own motivations before you commit to any particular franchise.
Knowing what you want means asking a few simple questions of yourself. Do you want to work full-time or part-time? Do you want a business where you’re on the frontline or do you want to step back and manage? How much are you willing to invest? What returns do you want from your investment?
If you can answer all of these questions, you’ll begin to get a clearer picture of what you want and what franchise might be the right fit. Unless you know what kind of business is going to satisfy you, your search for the ideal franchise will be difficult.
Know what you’re good at
As well as knowing what you want, it’s important to know what you’re good at. Unfortunately, these two aren’t always the same thing. You can be amazing with numbers but find accounting the dullest job around. If this is the case, you’ll have to come to some kind of compromise and try to work out which is more important to you.
If you do find yourself in the fortunate position of being able to pursue a job that you’re both good at and derive pleasure from, you’re in a perfect position. Remember, the best franchises for you are those that you both excel in and enjoy. It’s the magic combination.
What is your financial capacity to start a franchise?
Every franchisor has a different business model for its industry. You can start a franchise for as low as £10,000, while others go as high as £1 million. However, there are usually more benefits to the latter, such as a building to operate from, branded products, equipment and vehicles, and so much more.
Therefore, it’s essential to compare the initial investment costs against what you’ll need to buy or lease during the franchise contract period. Also, you need to calculate how much your operating costs will be per year against what you estimate you can make as a return on your investment.
Discuss your project with the family
If you have a family with a wife/husband and children or living with family, it’s ideal to inform them of your plans to start a franchise business. Not only will it financially impact everyone, but you may need to spend the first few months trying to get everything running smoothly, which may mean less time with them.
One of the best parts of owning a franchise is that you’re working with a brand that’s already established. That means you won’t need to worry about the foundation of your company. Also, you have more flexible hours. You can even get family members involved and run it like a family business if you want.
The important part is that you have your family’s full support.
Passion over profit
Though you may think it would be difficult to decide between a franchise that you’re incredibly passionate about and a franchise that has the potential to earn you a lot of money, it’s not. Go for passion over profit every time.
This is good advice for a number of reasons. First and foremost, if you don't have any passion for your work, you're going to find it very difficult to succeed as a franchisee. Every franchise business opportunity depends on a franchisee who is willing to sacrifice a great deal to make the business work. This level of dedication is very difficult to achieve without passion.
Secondly, a more profitable franchise may be better in the short term but in the long run, you're likely to struggle to maintain it. With franchisees who have no passion for their industry, careers are generally short. There's no reason to go on beyond the shortest period possible. The mantra here is ‘get in, get your money and get out'. While there's nothing necessarily wrong with this, it does not constitute a long-term business plan. When you're working on a labour of love, you can sustain momentum for longer.
Don’t rush expanding your franchise
If a franchise promises immediate profitability or a sure-fire shortcut to riches, steer clear. Franchising isn’t some kind of magic business model that can conjure profits out of thin air. Like any other type of business, it depends on hard work and dedication. There’s no such thing as a ‘get rich quick’ scheme and if that’s all you’re looking for, you might be in the wrong business.
Instead, look for a franchise that has a well-described and carefully constructed business plan. You want realistic steps towards success and a clear vision, not vague allusions to the millions you’ll soon be earning as a result of becoming the newest member of the franchise.
Research markets, search by sector
You’ve already seen how it’s better to select a franchise in an industry that you have a passion for. However, you also need to research markets per section for that industry. For example, the B2B industry is massive and can include sectors like bookkeeping, commercial cleaning, and many others.
While you may have extensive knowledge in your field, you need to research which markets are high in demand in your region. Remember, you want the highest yield in revenue to make the optimal return on your investment. Also, it’s good to keep tabs on the sectors to see if there have been advancements in services, products or technology.
Meet the franchisor
All franchisees need to meet the franchisor before they begin considering whether or not a franchise is right for them. The franchisor/franchisee relationship is so essential to a successful franchise unit that it needs to be one of the key factors that influence your decision.
While talking to your franchisor over the phone is a good start, it is necessary to meet them in person. You can tell a lot about a person when you meet them in the flesh and your feelings towards an individual can differ quite drastically. Body language is an important means of determining whether or not you consider someone honest or not. Likewise, having a short, face-to-face conversation will tell you more about your compatibility than hours chatting on the phone.
Speak to existing franchisees
It's also important that you speak to existing franchisees. Any franchisor with nothing to hide will be happy to provide you with a full list of current franchisees and their contact information. If they encourage you to speak to a specific franchisee, you need to be aware that there's a good chance you're speaking to the franchise's official cheerleader. Take what they say with a pinch of salt and ask to speak to a franchisee of your choosing. However, most franchisees will be honest about how their relationship with the franchisor has turned out.
Know your way out
Finally, it's important to think about how you're going to make your exit if everything goes wrong. No one wants to start their role as owner of a new business by thinking about what happens if it fails – but you should. A good franchise opportunity won't punish you for stepping away if things don't go to plan, unless the failings can be specifically attributed to you.
Finding Franchise Opportunities
As you can see, choosing the right franchise isn’t always a walk in the park. Finding opportunities is only one side of the scale. However, if you simply jump head first into a new business without evaluating all the factors, you aren’t giving yourself the best chance at success.
Recap what you want from a franchise
The most vital part of the whole process is deciding what you want from a franchise. Sure, everyone wants to make money in an industry that they love with minimal effort. Still, you need to ensure you’re getting some satisfaction out of it while delivering the best services available in the market.
Once you’ve researched, planned and assessed your financial capacity, it’s time for you to choose from one of the best franchises in the UK.
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Shaun M Jooste, Point Franchise ©