Buying a franchise is a significant commitment and one that you should enter into well informed and aware of what will be expected of you. If you've chosen the franchising route because you think you’re guaranteed to be a success, you will be disappointed.
Although there are many benefits to buying a franchise, you’ll still need to work hard, have determination and be dedicated to making your business a profitable one if you want to succeed. We’ve created a handy guide to choosing a franchise and making sure it’s the one for you. Before you sign the franchise agreement, you should follow this simple process to ensure you’re making the right decision.
STEP ONE: Work out whether franchising is right for you
The franchise business model doesn't suit everyone, so it's vital that you perform a self-evaluation early on. This way, you don't waste your time pursuing a career that isn't right for you. Remember, the franchise agreement is a legal document and once it is signed, you'll be obligated to run your business according to the franchisor’s system.
Ask yourself these fundamental questions to find out whether you have the attributes required to be a successful franchisee:
- Are you happy to follow someone else's rules to uphold consistency in the brand?
- Are you willing to accept that the franchisor may not approve any changes and improvements that you suggest for your franchise?
- Are you prepared to learn from the franchisor and accept their advice and guidance when it’s given?
If the answer to all three of these questions is yes, you’re in a great position to become a franchisee. If, however, you struggle to adhere to rules, have a strong entrepreneurial spirit or just have a desire to do things your way, franchising may not be for you.
Franchise systems should ensure that businesses in one network operate consistently from one location to the next. If you consider yourself to be a true entrepreneur who likes to make their own decisions and be in full control, starting an independent business from scratch may be a better route for you to take.
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STEP TWO: Find a number of franchises that suit your needs
Over 900 franchise brands currently operate in the UK, so when it comes to choosing the right one for you, you’re spoilt for choice. Start by making a list of brands or industries that interest you. Pick out brands you're passionate about, industries that you think suit your skillset or companies that offer flexible working arrangements if you need them.
One of the best things about franchising is that you don’t necessarily need experience or expertise in the sector you’re joining. This means you can start up a business without spending time completing apprenticeships, university courses or vocational certificates. So, let the world be your oyster and keep an open mind when it comes to making your decision.
You may want to look out for franchises that can be operated remotely or on part-time hours. Many businesses offer these options and, often, they’re much cheaper than other opportunities, as you won’t have to invest in property, insurance and extra utilities.
But, at this stage, don’t let things like the cost of the franchise fee or the percentage of the ongoing royalty fee cloud your judgement. Yes, you want to find a franchise that enables you to achieve a good income and that provides a positive return on your investment, but this shouldn’t be the only reason for choosing a franchise.
Finally, you don't have to love what you do to run a successful franchise, but it does help. If you've selected an opportunity to invest in purely based on whether you can afford the franchise fee, then you may find it hard to remain motivated in the long run. This could mean that you struggle to become profitable even if the franchise fee is one of the most affordable you can find.
When you’ve shortlisted the franchises that appeal to you, you can delve into the finer details and eliminate some of the less suitable options.
STEP THREE: Evaluate each franchise opportunity
Now is the time to start your due diligence with each franchise on your list. You can only buy a franchise with complete confidence if you’ve thoroughly researched each opportunity. Here are some critical steps you should take when performing your due diligence:
Check out franchise websites
Separate to their main customer-facing website, most franchises have web pages that list all the critical information about their franchise opportunities on offer. This information can be very useful when you’re comparing one franchise to another. You'll be able to request a franchise brochure and register your interest via the website so that a member of the recruitment team can get in touch with you.
Attend a Discovery Day
If the initial conversations with representatives from the franchise go well, it’s likely that you’ll be invited to attend a Discovery Day. This is usually held at the franchise's head office and gives you a chance to meet with the franchisor and find out more about the franchise opportunity. The franchisor will undoubtedly be evaluating you, but you should also use the Discovery Day to decide whether you’re a good fit for the franchise culture. From meeting with the franchisor and their senior team, you should get a sense of whether you could work with the franchise.
Speak to existing franchisees
An essential part of your due diligence is to speak with existing franchisees from within the network you're considering. Ask the franchisor for the contact details of their franchisees so you can start your research. If the franchisor refuses to give you this information or tries to select franchisees for you, this should serve as a warning sign. It's in the franchisor's best interests for you to discuss the opportunity with other franchisees, as they can then be confident that you're making a fully informed decision about becoming part of their business.
STEP FOUR: Consult franchise professionals
Once you've evaluated several franchise options and you're happy that you've found one that is a good fit for you, the next step is to consult an experienced franchise solicitor. It's crucial that your chosen solicitor specialises in franchising, as most general legal advisors will not have the required know-how to give you the guidance you need.
A franchise solicitor will help you to fully understand and negotiate changes to the franchise agreement if you want to. Franchise agreements are legally binding contracts that can be challenging to get out of if you have a change of heart after signing on the dotted line. That’s why it's essential that you understand everything in the agreement before you sign.
STEP FIVE: Craft your business plan
You may have thought that because you’re not setting up a business from scratch, you don’t have to write a business plan. But this isn’t the case. Every franchise unit is different, and you’ll need to lay out your ideas and objectives clearly before you start taking action to set up your business.
This will not only help you get your head around the unit and foresee any potential issues, but it will be crucial if you need to secure funding from an official lender. They’ll want to see that every aspect of your venture has been carefully considered and has a good chance of succeeding. Otherwise, you won’t be able to pay back your loan.
Make sure you include an overview of the business, details on your chosen location and workforce, market research findings and financial projections. Work out how much you’ll need to invest in total, what your regular outgoings will be and when you expect to break even. You should also add information about how the unit will be run and managed, in accordance with the franchisor’s business model.
Always check with your franchisor to see if they are willing to offer support during the business plan drafting stage. Some even give their franchisees templates, saving time and effort for new business owners. If you’re unsure how long your plan should be, don’t worry. There’s no right answer when it comes to the length of the document, but most fall between 20 and 50 pages. If you have a lot of diagrams and tables, your plan will probably be longer, but you should lay out your information in the way you feel is most appropriate.
The process of buying a franchise takes time and effort if you’re to ensure that the right decision is made. Take the time to work through each of our five steps if you want to give yourself the best chance of success.
Don't be tempted to cut corners to speed things up, as you could end up regretting it further down the line. Tackling the steps with caution will give you the time to gain confidence in your decision and even save up more capital – both of which will help you when it comes to getting your business up and running.
Alice Tuffery, Point Franchise ©