How to spot a good franchisor
If you’ve found your dream franchise, but are concerned that the franchisor may not live up to expectations – what do you do? How do you work out whether the franchisor will provide you with the support and guidance you need and not leave you high and dry as soon as you’ve signed the franchise agreement? The relationship between franchisor and franchisee is one of the most critical factors that will determine whether your new business makes it. Consequently, you need to be sure that your new partner can be trusted. Here, we take a look at how you can spot whether or not you're talking to a good franchisor.
Examine the franchise’s history
To know whether your franchisor is worth your investment, you're going to have to do some extensive research. You need to know both the franchise and franchisor's histories and understand where they've come from, what they've done, and where they're going. A lot of this will be put straight on the table when you first meet the franchisor (remember to fact check if anything sounds dubious!), but you'll have to dig a little deeper if you want to be 100% sure they're a safe bet.
In the UK, a franchisor has to release their audited financial records to any prospective franchisee. They’ll probably ask you to sign a non-disclosure agreement if you request to see these documents, but this is standard practice. Go over them thoroughly and don’t be afraid to ask questions if you’re not sure about anything. Look up their employment history and check this over. Make sure they haven’t filed for bankruptcy or been charged with a criminal offence. Essentially, you need to run a full background check to make sure nothing is being hidden from you.
Meet the franchise management team
A franchisor is only as good as the people they have around them. This means that you need to be meeting the franchise management team if you’re to get a good read on the franchisor. As a franchisee, you'll spend a great deal of time working closely with this team. In most franchise's they're responsible for helping and guiding you through the setup and growth stages. It's vital that you feel comfortable with them and believe them to have the necessary skills and expertise to help you grow as a franchisee.
The first step is to meet with the management team. This will likely take place in their office, where you’ll get an opportunity to chat and get to know one another a little. Next, you need to look into their employment history and work experience. Do they have what it takes to help you fully realise your franchise dream?
Contact existing franchisees
One of the best ways to get a feel for a franchisor is to talk to their existing partners. If they’ve got nothing to hide, they’re usually more than happy to hand over the contact information for all of their franchise network – particularly if you’ve shown interest in becoming a franchisee yourself. If they’re reluctant to provide contact details but will happily set up a meeting with a franchisee of their choosing, think twice about agreeing. The franchisee in question is likely to be a cheerleader for the franchisor and cannot be trusted to tell the truth. A franchisor that allows you free access to their entire franchise network shows that they've got nothing to hide.
It’s also important to be wary of embittered franchisees. Most franchisors, no matter how professional and dedicated to their franchisees they are, will have fallen out with one of their franchisees at some point. This is almost inevitable and should not be taken as representative of the general franchisee experience. Just as you dismissed the cheerleader as unfairly biased, it would be a good idea to do the same in this situation.
Talk to others in the franchising sector
The franchise sector is relatively small, and there’s a great deal of networking that goes on between franchisors and franchisees. There are expos and franchise fairs, trade publications and newsletters. This means that word travels fast in the franchising community. People working in the franchise system will know who the popular franchises are and who’s going through a rough patch. They’ll know which franchisors have been hit by scandal in the past and which have a reputation for mistreating their franchisees.
Of course, with all of this, it’s necessary to be wary of gossip and always look for supporting evidence. However, asking around and talking to those that work in the sector are great ways to work out who is well respected and who is out for themselves. Competitors may have bad words to say about one another, and bitter ex-franchisees may have it in for their former boss but, generally, most people will give you an honest appraisal of how a franchise is thought of.
Use the British Franchising Association
The British Franchising Association (bfa) are the national body responsible for accrediting responsible and ethical franchises. Any franchise that is a member of the bfa will have passed their relatively strict operating codes and can be assumed to be a legitimate franchise. While this doesn’t mean you shouldn’t perform all of the other checks, it does mean that the bfa website is a useful reference resource.
However, it’s important to note that not all good franchises are members of the bfa. Besides not wishing to be exposed as a fraudulent franchise, there's a variety of reasons a franchise may choose not to join the organisation. Perhaps they're a young franchise that's yet to apply or that wants to wait a little before applying. Maybe they're an international franchise that's been accredited by a different franchise organisation. Rather than jumping to conclusions, the bfa should be used as a way of gathering information and ensuring that you make an informed decision.
If you’re going to make your business work, you’ll need the support of an excellent franchisor. Working out whether they're the individual you want to partner with can be extremely challenging. However, if you follow our five-step guide, you should be in an excellent position to make that call.
The Editorial Team, Point Franchise ©
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