Top 10 checklist for buying a franchise this year
Thinking about quitting your job to become a franchisee? The British Franchise Association has outlined 10 priorities you need to consider...
The number one priority for any prospective franchisee who has found a franchise brand, or brands, they are interested in potentially joining is to make sure that the franchise is what it says it is.
You’ll receive all sorts of impressive franchise marketing collateral and promises when you’re speaking with a franchise about investing but it’s your job, above all else, to retain a cool head, steady hand and clarity of mind. Ultimately, you’re looking to find out that what you’re being told is mirrored in reality.
So how exactly can you do that? With the mantra of ‘research, research, research’ running through everything you do in your franchise due diligence, here are 10 key areas to focus on:
.1. Work out what can you afford: Levels of investment range greatly. It’s important to find out what the total start-up fee typically is, not just the franchise fee. Assess and understand from the beginning of your process what you can afford to invest and how much you are prepared to borrow from a bank or family – and remember to consider working capital.
2. Use the British Franchise Association (bfa): The bfa accredits franchisors using a stringent set of criteria which reviews their systems, franchisee support and disclosure of information in line with the European Code of Ethics for Franchising. It is the not-for-profit trade association for UK franchising that exists to help people in exactly your position with objective, unbiased information. Visit the bfa’s website, thebfa.org, for advice, tips and 50 questions to ask a franchisor, as well as a list of all accredited member franchisors and advisers.
3. Take the Prospect Franchisee Certificate: The Prospect Franchisee Certificate (PFC) is the first course of its kind, created to deliver a comprehensive overview of what it takes to succeed in the UK’s £15bn franchise sector where individuals run their own business under an established brand. The modular, video-based course provides insights into everything from evaluating franchise opportunities to business management, financial understanding and legal considerations. Best of all, it’s completely free and can be taken on any device, anywhere with an internet connection, either in a single day or in bite-sized chunks. Find out more at thebfa.org/PFC
4. Speak to existing franchisees in the network: You want an extensive list to choose from, not just a few that the franchisor provides you with. Remember that, in this case, the franchise contacts provided to you may be cherry picked by the franchisor. Speak to both successful and any less successful franchisees to give you a rounded view. Existing franchisees can tell you what the franchisor’s support is like; if the turnover/profit projections are realistic, and many other things from the coalface of the business. Essentially, check that what you’re being told is reflected in their experiences.
5. Understand the franchise: Make sure you understand all the business operations and what you’ll be doing on a daily basis, as well as the lifestyle it will give you. You may choose a field you’re experienced in, or one that you’re passionate about – but think carefully about what you want to do!
6. Consider the training: Be sure that the training provided – both initially to get you up and running and on an ongoing basis to help your business grow – is sufficient for you to be able to gain the skills required to operate the business successfully.
7. Consider ongoing fees: Franchisors charge a management service (royalty) fee, which will usually be collected either as a percentage of monthly turnover, or through the supply of the raw materials that you need to operate. Make sure you understand the structure and level of fees, and what you get in return. These fees fund the ongoing support that you receive and the future development of the business.
8. Talk to head office staff: Don’t underestimate the importance of meeting the people involved at head office, finding out who you would be in contact with and what their experience is. You need to have a good, ongoing relationship with these people, so you need to ensure that you can work with them on a regular basis.
9. Get the franchise agreement checked by a franchise lawyer: You’re about to sign a legally binding contract, usually for five years at a time. Getting it reviewed – to know exactly what you’re signing up for – is essential! Franchise lawyers can be found on the bfa website.
10. Selection process: If the franchisor doesn’t appear selective about who they recruit, walk away. You want to see that they are stringent in their process and don’t just allow anyone and everyone to join the network whose brand you will be trading under. Investing in a franchise should be a two-way recruitment process.
Finally, take your time! Make sure you assess and re-assess everything as part of your research before you fall in love with a concept and a dream.
You’re parting with your hard-earned money and making a commitment for several years (usually five years at a time), so it’s essential to be certain rather than making an expensive mistake. A good franchisor won’t pressure you into a decision, they understand the level of undertaking required and want serious people to join their network. If you feel rushed, walk away.