This is your comprehensive guide to buying a franchise business. Below, we list the 10 steps you need to complete and provide a number of valuable resources for you to find out more information.
If you want to open your own business, franchising can be an efficient alternative to launching an independent start-up. Franchises can offer all the benefits of self-employment, including a high level of control and a good work-life balance, without the uncertainty of going it alone. On top of this, you’ll get the chance to use a proven model, work under a recognisable brand and benefit from an established customer base. Here, we show you how to buy a franchise business in 10 steps.
How to buy a franchise business
1. Become a franchising whiz
Before you go any further, you’ll need to make sure you know what franchising is and how it works. There are a few ways you can do this:
a) Before looking at specific franchises, spend some time getting to grips with the world of franchising. Make sure you understand the business model inside out and are sure it’s for you. Read our handy Franchise Definition guide here.
b) Take a look at the franchising industry; see which types of business are thriving at the moment. For example, fast food businesses lend themselves well to the franchise model and often prove to be lucrative investments, but there is a whole host of sectors that offer fantastic franchising opportunities.
c) There is also a lot of jargon that goes along with franchising. For any technical terms you haven’t heard before, have a look at Point Franchise’s glossary, which lists words you’re likely to encounter during the franchising process.
2. Do your research
Once you’ve familiarised yourself with the franchising system, you will be better equipped to carry out research into the types of businesses you would like to work with.
Visit comparison websites like Point Franchise to get an idea of what’s out there. You’ll be able to filter businesses looking for new franchisees by industry, investment requirements and region. Or, for more personalised support, you could enlist the help of a franchise consultant, who will be able to guide you through the available options.
Remember: Not all franchises will be recruiting new franchisees at the time you are looking. So, try to find out whether businesses you are interested in are likely to be on the lookout for new business partners in the near future. If they are, keep checking back regularly. It’s much better to wait until you can invest in a business you’re really passionate about than rush into joining one that happens to be recruiting when you’re first looking.
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3. Work to your strengths
When you’re browsing franchise opportunities, consider your personality and previous experience; ignoring these things to start a business that you think might be lucrative will probably lead to trouble.
So, think about your personal and professional strengths and look at franchises that will allow you to exercise them. For inspiration, why not take a look at our article series, Starting a Franchise for Every Personality Type, starting with ‘The Creative’?
While you don’t necessarily need a genuine interest in the industry, your business is more likely to flourish if you enjoy running it. Also, try to make sure your personal values align with those of the franchises you’re looking at.
4. Narrow down your options
Once you’ve got a shortlist of franchises you think you’d like to join, you’ll need to narrow down your options. Consider your own requirements and financial restrictions. Set a maximum budget and stick to it, remembering that many franchises have additional franchise fees on top of the total investment amount.
Also, reflect on your characteristics and preferred working arrangements. Ask yourself:
- Would you like to be in charge of a team of employees or would you rather work alone?
- Are you happy to work on-site or would you prefer to stay at home?
- Are you happy to work evenings and weekends or would you like to have the flexibility to work around your existing commitments?
- Are you interested in a part-time or full-time role?
The answers to these questions will affect your choice of franchise, so think carefully about how you want your work life to be.
5. Get expert advice
An entrepreneur is only ever as good as the advice they’re given. So, however experienced you are, make sure you surround yourself with knowledgeable people who can support you when you’re in need of help. Franchises are complex structures and there are many legal and financial processes that need to be taken care of when setting one up.
Always accept guidance offered by franchisors, existing franchisees, legal professionals, accountants and even friends and family. This extra help is one of the advantages of choosing to join a franchise instead of starting a business from scratch. You’ll be part of a large support network with a wealth of expertise and experience.
The British Franchise Association (BFA) acts as the franchise sector’s regulatory body and is an excellent source of information. Take a look at its affiliate directory to find trusted advisors who can help you assess potential investments and offer valuable recommendations.
6. Get to know your future franchisor
Once you’ve chosen your franchise, you should get in touch with the franchisor to discuss the joining process. Take the chance to get to know them and make sure your personalities don’t clash. You’ll need to be able to work closely with them if your franchise is to succeed, so make sure this is possible. You don’t have to become best friends, but you should feel comfortable talking openly and honestly with them.
Discovery days are a great way to meet your franchisor and explore the franchise’s headquarters. If you’re invited to one, treat it as another step in your journey to becoming a franchisee, as it’s a great way to get a true idea of the business’ culture and how the business works. Learn more about preparing for a discovery day here.
7. Look to existing franchisees for advice
While your franchisor is there to support you, you may be able to get a more authentic picture of the franchise by talking to existing franchisees. They can corroborate the franchisor’s claims and give you an idea of what to expect.
They’ll also be able to tell you whether the franchisor has exaggerated certain facts and figures, or the amount of support provided. For this reason, seeking out other franchisees is an invaluable learning tool.
Getting to know franchisees at this point is also a great way to make connections within the business before you officially join it. This way, if you have any queries or concerns further down the line, you’ll have contacts you can get in touch with.
8. Create your business plan
Every franchisee should prepare a business plan before they sign a franchise agreement. You’ll almost certainly need one if you’re planning to borrow money from a financial institution, as the lenders will want to make sure you have a viable business strategy.
The business plan lays out the strategies for the first few years of the business and establishes targets to work towards. Your franchisor should work with you to create it, and should be able to provide financial documents from established franchise units to help you develop your profit projections.
Click here to learn more about the business plan.
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9. Read the franchise agreement thoroughly
The franchise agreement is a legally binding document so, once you’ve signed it, you’re required to adhere to it. Before signing, make sure your franchisor and any legal professionals you’ve consulted have answered all your questions and that you understand your obligations and responsibilities.
If the franchisor is vague, reluctant to provide answers or deliberately tries to hide something, you should treat this as a red flag. To make sure you’re clued up, read more about franchise agreements here.
10. Apply for finance
Most franchisees will need to apply for funding to start up their business. Many lenders offer up to 70 percent of the required investment sum, but the amount you’re given depends on your business plan, financial history and suitability as a franchisee.
Many franchises will have a portfolio of approved financial institutions, but you could approach another lender for the loan. Alternatively, why not consider borrowing from friends and family? Whichever option you go for, your franchisor is there to guide you through the process.
To find out more about the different ways to finance a franchise, click here.
Running your own business
This article explains how to buy a franchise business in 10 steps. Starting your own franchise unit is a huge undertaking, and while franchising eliminates some of the hassle and uncertainty involved in starting a business from scratch, it still requires a large amount of research and dedication.
Needless to say, joining a franchise should not be a spur of the moment decision; you’ll be investing your time, money and effort into the business you decide to build. So, completing these steps in order will help you make sense of the process.
Alice Tuffery, Point Franchise ©