You’ve attended a franchise show and discussed investment opportunities with a number of different businesses – but what now? This article is your go-to guide for making sense of the vast amounts of information you’ve likely come away with and choosing the right franchise for you.
Franchise shows are fantastic opportunities to compare and contrast a huge range of businesses all under one roof. In just a few hours, you’ll be able to speak to a wide variety of different franchisors and ask them any burning questions you have about their investment opportunities. By the time you leave, you should have a much better idea of the types of franchises that are out there and which ones you can see yourself joining.
But, of course, not all will suit your working style, personality or home life. So, how do you tell the difference between the right franchises and the wrong ones? Here are seven steps to take after a franchise show.
1. Narrow down your choices
This step should be fairly easy. Once you’ve had a chance to digest the information you were given at the franchise show, it’s time to decide which opportunities you’re not interested in pursuing any further. Eliminate any franchises that demand more time or money than you’re able to invest. Also, disregard ones with values you don’t fully agree with or franchisors you don’t feel you could get on well with.
Once you’ve done this, take the time to think carefully about what the remaining franchises would require. Ask yourself whether you would be prepared to go above and beyond for the business and whether it would still interest you several years down the line. In other words, if you’re not passionate about the work it does or sector it operates in, it may not be the best option for you.
You should also look into the franchises’ available territories, as many franchisors ask that franchisees live in the region their businesses operate in. If this is the case and you don’t want to uproot your family or move away from your friends, make sure your preferred franchises have territories available near your home.
If you’d really like to join a franchise that doesn’t have available territories near your hometown, you could look to see whether any existing franchisees are selling their units. By buying a local branch, you could skip the set-up phase and benefit from an established business and existing customer base.
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2. Contact good franchise opportunities
You should now be left with a few great investment options. The next step is to get in touch with the franchisors – or the franchise’s support teams – and ask for more detailed information. During this initial call, you’ll be able to find out whether the business opportunity fits well with your ambitions and whether there are any availabilities in your area.
TIP: Document your conversations and note down your first impressions. Did they send you any information following the first call? Was the information they sent you professional and up to date? Was the franchisor or their representative polite and knowledgeable? Were they able to answer all your questions?
These may seem like small details, but this initial activity could be an indication of the level of support you would get if you chose to become a franchisee. A great franchisor will always treat prospective franchisees with respect and professionalism, so remember which franchise teams work in this way.
3. Create a financing plan
It can be difficult to know whether you can afford to take on a franchise. It’s not just the initial start-up costs you’ve got to think about; there are also royalties and marketing fees – and that’s on top of any other overheads, like staff salaries. Creating a finance plan can help you work out which franchises are right for you.
Franchisors should be able to help you with this process by providing financial figures from previous franchise unit set-ups. This will give you an idea of how much you’re likely to spend and earn in the first few months or even years of the business. Just make sure the franchisor doesn’t cherry-pick the highest performing franchise units to encourage you to invest. You’ll gain the best insight from franchisees who have set up a business unit in the same region you’ll be operating in.
You will also need to think about business loans if you’re not lucky enough to be able to finance your venture with your own money. If this is the case, you will need to make sure you’ll generate enough income to cover your repayments too. Depending on the type of loan you take out, you may find there are disastrous consequences if you fail to pay back your loan.
TIP: As you can see, creating a financing plan can be tricky, so it can be useful to consult an accountant or financial advisor at this point. They’ll be able to talk you through your options and make sure everything adds up.
4. Review the Franchise Disclosure Document (FDD)
The Franchise Disclosure Document is an extremely valuable resource when it comes to learning more about a franchise. FDDs contain all the information you need to know, including the investment requirements, the franchisee’s obligations, the projected annual turnover and the history of the franchisor. At the moment, UK franchisors are not required to provide an FDD by law, but good franchises offer this document to potential franchisees.
TIP: Always consult a specialist franchise solicitor to review the FDD with you. They’ll be able to explain any complex or unfamiliar terms and make sure you’re aware of all the obligations you’ll have as a franchisee. And, although FDDs are incredibly useful, you should still do your own research. By looking up the franchise online and getting in touch with the relevant people, you should be able to corroborate a good number of the claims in the FDD.
5. Attend a Discovery Day
Once you’ve expressed your interest in a franchise, you’ll probably be invited to Discovery Day. This is a chance for you to visit the franchise’s HQ and meet the franchisor and their senior team. By the time you take this step, you should already have a solid understanding of the business and how it operates. What you won’t know about is the company culture.
On the discovery day, you’ll be able to get a feel for the franchise and whether you would fit in there. Does the atmosphere suit your working style and do you like the way the team interacts? By attending discovery days for all your preferred franchises, you can eliminate the ones that don’t ‘feel’ right.
If you’re still struggling to decide, ask yourself which franchise you can see yourself being a part of in the long term – and trust your gut; it’s usually right.
6. Meet with existing franchisees
Meeting your future franchisor is important, but the most relevant and honest feedback you’ll get is from existing franchisees. By talking with the people who are already working in the business, you’ll gain an understanding of what it’s really like to run the business on a day-to-day basis. You’ll also be able to find out exactly how much support they get from the franchisor and whether they’ve identified any problems with the franchise model.
Good franchisors will encourage you to meet with franchisees already in their business – after all, they should have nothing to hide. It’s in their best interests to make sure you’re making a fully informed decision, as an unsuitable franchisee will probably damage the franchise as a whole in the long run.
TIP: Again, when asking franchisors for existing franchisees’ contact details, make sure they don’t cherry-pick particularly successful business owners. A great franchisor will provide you with a list of franchisees and give you the chance to choose which ones you speak to.
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7. Make your final decision
Now you have to decide which franchise you want to join. By this point, you’ll have taken all the necessary steps to find out as much information as you can – and corroborate it. All that remains is for you to choose your favourite business. Don’t rush this step; you’ll be investing a considerable amount of money, time and energy into the franchise, so take however long you need to decide.
Once you’ve come to a conclusion, you can start the next exciting chapter of your franchise journey – applying to become a franchisee and building your business unit. For more information about the next steps, see Part 2 of our Official Franchise Start Up Checklist.
Or, if you’d like to visit another franchise show before you make your mind up, read The Complete List of Franchise Expos Worth Attending In 2020.
Alice Tuffery, Point Franchise ©