Choosing a Successful Franchise

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How to choose a successful franchise guide

As long as you find the right franchise, becoming a franchisee can offer superb benefits. Being your own boss, choosing your own hours and having the independence of owning your own business are the obvious attractions. In addition, theres less risk involved that starting out on your own: becoming part of a franchise allows you to make your own decisions, but with the support and guidance provided by an already-established company.

However, becoming a franchisee isnt something to be entered into lightly: as with any decision, it comes with its own peaks and pitfalls. With financial investment required from the outset, minimising those potential pitfalls is crucial to ensuring that you get off the ground and achieve your goals.

The answer is to do some detailed research, which will enable you to decide which franchise is worth its salt and your investment. The problem for some entrepreneurs-in-waiting is knowing which questions to ask.

Consider the Cost

The first consideration youll need to take into account is the cost involved. Buying into a franchise can involve significant sums of money and you need to be sure that youre spending wisely. Will you need to take a loan out, in order to subsidise your venture? What sums of money are you comfortable spending, to become part of a franchise?

While there are some lower-budget opportunities available, there are also those that run into the hundreds of thousands of pounds: the more you invest, the more work youre likely to have to do to recoup what youve spent. If youre looking at a franchise as something to earn a little extra on the side, youll want to keep your initial investment on the lower side. However, if youre looking at a complete career-change, you could be looking at spending considerably more.

Stack the Odds in your Favour

You also need to know that the odds of making your money back are stacked in your favour. Before you start to consider factors such as profit margins, you should research the franchises youre interested in, to see which offers the best average ROI. While the worst-case scenario is walking away, out of pocket, you can minimise that risk by buying into franchises that have an established track-record of good returns for franchisees.

Reading the small print might not be the most exciting part of buying into a franchise, but it can save you from encountering any unwanted surprises. Its worth checking whether there are any stipulations from the franchisor, that might affect the way you operate. One of the most common pitfalls for any franchisee is to walk into an agreement where stock must be bought from the franchised company or their preferred choice of supplier. In some cases, franchisors have been known to inflate the costs of supplies, which is a quick route to ensuring that their franchise opportunities fall at the first hurdle.

Buying into a Brand

When buying into a franchise, it makes sense to want to be part of a brand that has already cemented a good reputation and established a loyal consumer-base: large brands are instantly recognisable and can take a lot of the work out of trying to find a market for services or products. However, buying into a big-brand franchise can come at a significant financial cost, which prices some investors out of the game before its even started.

The next-best option is to seek out more affordable franchises from lesser-known brands. While its a good idea to work within your budget, brands that arent quite so familiar will require some research, to ensure that thy at least have a foothold in the business sector youre interested in. As a rule of thumb, the lesser a brands reputation, the harder youre likely find it to make your ROI, let alone a profit.

Sifting the Wheat from the Chaff

In the early days of franchise, opportunities were offered by businesses, who had the freedom to tailor contracts and fees to their own advantage. Today, the industry is regulated by the British Franchise Association (BFA). The BFA is the governing body in this sector and ensures that franchisors and their franchises meet their strict criteria, before they are granted membership.

Standards of practice, ethics and compliance are monitored and assessed to ensure that franchises that have achieved BFA membership continue to offer excellence, across the board. As part of your research, you should check if the franchises youre interested in are BFA-approved. If theyre not, they are probably worth passing-up.

Similarly, there are several awards given within the franchise community, that reflect high standards. The HSBC Franchisor of the Year Award is a prestigious and much-coveted seal of approval within the industry, marking out franchises as the best of the best. However, these dont just apply to the big-name brands: with the awards, there are various categories, including:

  • Franchisor of the Year
  • Customer Focus Award
  • Microbusiness Award

The HSBC Franchise Awards, in conjunction with the BFA, are a quick and accurate way to judge a franchises worth. In addition, there are a number of awards available to franchisees, which may well give you an extra goal to aim for as your franchise expands.

The Most Important Ingredient of All

The final point of consideration might seem an unlikely one, but it is possibly the most important ingredient in the recipe: you. Before you go anywhere near a franchise, you should ask yourself what you want to achieve from buying into one. Consider what you think your own strengths and weaknesses are, whether you will be able to self-motivate and self-manage, how long you intend to be part of a franchise, how many hours youre prepared to put in and whether or not your chosen business sector inspires and excites you enough to keep up the momentum required over a long period of time.

Being a franchisee can be an exciting venture, giving you more control over how and when you work and without having to answer to a boss. However, before you go anywhere near a bank transfer or signing a contract, do a little homework: it could save you from a potential disaster and even help you exploit an opportunity to its fullest advantage.

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