Is This The Right Franchise Opportunity?
If youíve always dreamed of becoming your own boss, then there are plenty of franchise options for you to choose from. Whether you want to run a busy restaurant or prefer to operate a part-time franchise from home, there will be an opportunity that right for you.
But before you invest in any opportunity, you need first to understand if you're suited to following a franchise system. For those with a strong entrepreneurial spirit, it can be tough to adhere to the rules set out by the franchisor. While for others, the franchise model is a great chance to benefit from a reputable brand with a proven track record of success.
Once youíve decided that franchising is for you, then you need to identify the best franchises for you to invest in. Before you sign on the dotted line, consider the following factors to confirm whether youíve found the Ďoneí.
Is there a demand for the franchise in your preferred location?
When youíre thinking of starting any business, the first step is to ascertain whether there is a demand for the product or service you propose to offer. The same is true when you plan to buy a franchise. There are many benefits of investing in a franchise, but it's no guarantee of success. If there is little or no demand for your product or service, then you're doomed to fail before you start.
Always ensure that you do your research before you consider buying a franchise so that you can be sure that thereís enough customer interest to build a profitable business. Itís also worth bearing in mind the potential for expansion in case you decide to buy additional franchise units at some point in the future.
As well as there being consumer demand, you also need to consider if the location is right for other reasons. If your business is not easily accessible, it will be tough to achieve profitability no matter how much customers want or need you.
If your franchise model is based on you offering your services at customersí premises, or you delivering your products to them, then the location of your franchise may not be as important. But you still need to consider factors like rental cost and accessibility for your employees.
Has the franchise got a proven track record of success?
There are over 900 franchised brands operating in the UK, but this doesn't mean that they're the right franchise options for you. The best franchises are tried and tested and, more importantly, can prove their track record of success. Here are some ways that you can establish the performance history of a franchise:
- Do your research: You can find out financial information about a franchise that youíre interested in if the franchisor is a company registered at Companies House. The latest accounts should be available for you to view here. If you have trouble finding them, ask the franchisor to provide you with details of their financial performance.
- Request pilot performance data: If youíre considering investing in a relatively new franchise, then the franchisor may not have adequate financial information to share with you. If this is the case, you should ask the franchisor to show you the franchise pilot results to give you an idea of the viability of the business.
- Speak with other franchisees: The best franchises will encourage you to speak to existing franchisees within the network. Itís in the franchisorís best interests for you to make an informed decision about whether their franchise is right for you. Talking to franchisees from within the network can give you a good idea of how profitable the business is, how it is growing, and how well the franchisor supports its franchisees.
Remember that businesses grow at different rates, but if a franchise has been profitable over an extended period and has experienced steady growth, then itís a good sign that this is a franchise worth investing in.
What will you get in return for the franchise fee?
When you invest in a franchise, you'll be paying a franchise fee but how can you tell if youíre getting value for money? Well, for a start, the franchisor should make no profit from the franchise fee as it should cover:
- Access to the franchisorís intellectual property;
- The cost of recruiting you; and
- The cost of training and supporting you.
The cost of the initial fee can range anywhere from £1,000 to £1,000,000 and depends on the type and size of the franchise you're purchasing. Remember that just because the franchise fee is for a significant amount, itís no reflection on the training and support that you will receive. Equally, an opportunity with a smaller franchise fee may be one of the best franchise options for you with great support from the franchisor. The only way to be sure of whether you're getting a good deal is to do your due diligence.
How restrictive are the terms of the franchise agreement?
The whole franchise model is based on the fact that franchisees follow guidelines and standards set by the franchisor. In a franchise relationship, the franchisor has the upper hand, and the franchise agreement will contain a raft of obligations which youíll be expected to fulfil.
However, when youíre reviewing the franchise contract with your solicitor be sure to look out for any unreasonable restrictions. Even though the franchisor has control over many aspects of the business, you should still be able to run your franchise with freedom and flexibility. If you feel that there are too many restrictive conditions in the agreement, you can either try and negotiate them or walk away and find a franchise opportunity which is more suited to your needs.
Buying a franchise is a significant investment to make, and so you need to be 100% certain that you've found the right one. If you have any doubts, then you should trust your gut instinct rather than making a decision that you may end up regretting.
The Editorial Team, Point Franchise ©
Discover the Recipe for Success with a Cook Stars FranchiseArticle published on 18/08/2018 17:00
A Guide to Choosing the Perfect Location for Your FranchiseArticle published on 18/08/2018 08:00
Top Five Franchises for Car LoversArticle published on 17/08/2018 17:00
Find Out More About Home Instead CEO and Co-Founder Trevor BrocklebankArticle published on 17/08/2018 08:00
How to Start a Successful Franchise on a ShoestringArticle published on 16/08/2018 17:00