How to succeed in franchising
The bfa’s Paul Stafford on the six things you should consider before becoming a franchisee
If you’ve just discovered franchising as a concept of self-employment and you’re starting to look into the myriad of franchise options on offer, it can be tempting to blindly look through every website directory you can find.
But, before you do that, there are some simple steps that can put you in a much stronger position to thrive as a franchisee when you do take on your own business. Act in haste, repent at leisure? Not if you’re on the ball from day one.
So before you spend hours trawling franchise sites, spend a few minutes reading these tips and put yourself firmly in a place to maximise your chances of success.
Honesty is the best policy
This old adage should be at the forefront of every prospective franchisee’s mind from the outset. It should encompass everything that informs your decision on which brand to invest in.
What we’re talking about is honesty with yourself. There’s plenty to consider, which is why you should be taking your time, NOT rushing, when buying a franchise; and why looking inwards is the crucial first step in the process. Introspection is your friend in the following considerations:
Your skill set
Take time out to list what you bring to the table. Franchising revolves around transferrable skills –a good franchise offers substantial initial and ongoing training and support which is why the overwhelming majority of franchises are suitable to people with no direct prior professional experience in whatever industry the franchise is in.
So think about your top skills; sales, administration, business growth, getting hands-on in a business, marketing, people management, networking…what do you do best? Finding a business that plays to your strengths will immeasurably improve your chances of franchise success.
The type of person you are can be crucial to your business outlook. Are you outgoing or an introvert? Are you naturally adept at working with, and leading, teams, or better on your own? What are you passionate about? Looking honestly at your own traits can give you good insight into the type of operation you’re likely to be successful with.
Combining your personality traits with your skill set can give you a powerful indicator of the franchise that is right for you.
First, think about what kind of operation you want to run, and why. Do you want to be hands-on, or a business manager and developer? Out on the road or working from home? Lone wolf or avid networker? Is potential profit the most important factor in your decision-making, or is a better family balance higher on your priorities?
Second, take time to understand what’s driving you to want to become a business owner. Are you tired of working long hours for the reward of others, is it succession planning for your kids, to be a part of your local community, to have control of your own professional life, to take home more money…there are a plethora of reasons that bring people into franchising.
Knowing what your driving forces are is important in order to determine the franchise opportunity that can give you what you’re looking for.
To put it simply, work out which franchises you can afford. There is a huge range of franchises to suit almost every budget, from a few thousand up to hundreds of thousands, but before you fall in love with an idea it’s important to know the ceiling of your liquid capital combined with any funding you can access.
Work out how much finance you personally have available (and are willing) to invest in the franchise, then consider your funding options which can add substantially to that figure. By far the most popular option is bank lending – banks like the franchise model because they can access historical data from already-trading franchisees – with other sources including family and even franchisors, a few of which will finance the cost of starting up over a period of time for the right franchisee.
British Franchise Association (bfa) member franchises are looked upon favourably by the major banks because they understand the strict criteria involved in gaining bfa membership; which includes proof of financial sustainability to support a network properly, and evidence of previous franchisee success. For franchisees of reputable franchisors, banks will typically lend up to 50-70 % of the start-up cost, depending on how long they’ve been trading. Of course, regardless of the brand you’ll still need a strong business plan to gain bank funding.
To give an example, if you have £20,000 in liquid capital to invest then with an established franchise in good standing with the banks you can potentially take on a business with a total start-up cost of approximately £65,000, around 70% bank funding on top of your £20,000. For a newer brand, it might be more like £40,000.
Doing the maths gives you a clear idea of the range of franchises that are realistic for you, financially speaking. You must also remember to consider working capital in the early days of the business before you’re turning a profit.
Running a franchise is a serious proposition. You must take your personal life and the circumstances of those around you into consideration. Discussions with your partner and family are crucial, you will need their support when you take the leap into self-employment and many franchisors will want to see that you have that support.
Think about what you want to get out of the business and how it might impact those around you. Some franchises, at least in the early days, require more than a 9-5 undertaking, while others are set up to appeal to parents and fit perfectly around a young family and the school run. Be prepared to keep up with the business demands and know that you can do so around your other commitments.
It’s worth repeating time and again that buying a franchise is not a decision that should be rushed. It’s a legal, financial and emotional commitment – and one that could change your life for the better if you approach it the right way. A long, hard look in the mirror is a good first step!
Paul Stafford is public relations manager at the British Franchise Association (bfa).