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10 things to discover before buying your franchise

Written by: Nick Strong

Article Overview: So you want to go into business via the franchise route but what should you ask the franchisor before committing to the contract.

10 things to discover before buying your franchise

1. Take a good overview at your strengths and weaknesses – are you sure you have the capacity, temperament and skills to run your own business? Marketing and selling skills are becoming more important in running a franchise. When you run your own franchise business you need to think carefully about how you manage your time. Can you prioritise well and focus on activity that will drive your business forward?
2. Make sure you have the full support of your family – the additional responsibilities and demands on your time will inevitably cause some strain. Although we are always optimistic in business there are times where it can be tough. At these times it is vital to have the unity of those closest to you.
3. Choose some existing franchisees to talk to – ask how their business is performing and what support and service is being provided by the franchisor. Are the franchisees happy? What do they like and dislike about running the franchise?
4. For new franchisors, check they have run a pilot, how long did it operate, is it still trading and what has it achieved in financial terms? If no pilot was operated how does the franchisor know the franchise and therefore will you be successful? Taking on a franchise reduces risk in business as the system is tried and tested. Make sure that you are happy with the proven track record available for you to inspect.
5. Examine how well known the franchise and its service/product are. If it is a new franchise brand you can ask what customer surveys they have carried out. It is always good to see customer comments on a service. In business the customer is king so their comments really matter. A good reputation is a head start in business.
6. Look at the market as a whole – find out who your competitors are and how strong their position is. What is unique about the franchise proposition? If the brand is not well known you need to see what you can take to market as their franchisee.
7. Examine costs closely, in particular the franchise fee and monthly management fee, and whether they are reasonable and value for money; will the margins be sufficient to support the business after payment of regular fees to the franchisor? As a guide, the average franchise fee is £20,000, although this is skewed in view of a small percentage of higher figures. Ongoing fees average 11.4%.
8. Is the training provided by the franchisor sufficient to enable you to run the business successfully? The training should outline everything you need to know about the business and how to build it day by day.
9. Seek professional advice from an accountant about income and profit projections and from an accountant about income projections and from a solicitor about the legal agreement. Both should have a good understanding of franchising and preferably be affiliated to the British Franchise Association.
10. Talk to the Franchise sections of the main lending banks about the financial aspects of running a franchise and ask them to put you in touch with your nearest area franchise manager. You should also contact the British Franchise Association.

Related Articles
  Reselling Your Franchise
  Buying A Franchise
  Franchising with all its Success
  How to Purchase a Franchise that is Right for You
  Seven Questions to Ask when Starting a Franchise

Article Tags: 10 things, buy a franchise, franchise business, franchise opportunities



Related Forum Posts
What are the reasons why you would NOT buy a franchise? - Even though I'm a strong believer that franchising as a great business model, I would personally not buy a franchise. My main reason for not buying a franchise is that you're not your own boss. You take all the risks without really being in control of your business. To me that's the biggest drawback. What about you? What are the reasons why you would NOT buy a franchise?
Re: Franchising? Why pay franchise fees? - Most successful business owners, who develop a franchise program, state that it took them several yers, and perhaps hundreds of thousands of dollars, to figure things out and get to where they are today. Franchising offers the person wanting to own a business the chance to open at the point where the franchisor is today. They may have to pay a franchise fee, but it will likely be much less than the cost of their own learning curve. Additionally, franchising may offer a better chance for ongoing success. That being said, truly entrepreneurial types normally don't buy a franchise; they have the capability to fiture most things out for themselves. Sourcing, however, as mentioned above, is a strong benefit of franchising. T Those buying franchises are frequently individuals without a great deal of business experience (although there are exceptions, and multi-unit owners are certainly an exception). Franchise operations manuals are written to the level of a new business owner for whom this may be their first such experience.
What makes a good franchise? - I have yet to find a comprehensive list of what makes a good franchise opportunity. What are the main components that entrepreneurs should look for before buying into a franchise? Any ideas from our expert forum members?
Re: Franchising? Why pay franchise fees? - [quote:5ii0papt]Starting a franchise is like buying yourself a job and inheriting the "recipe for success". In addition, a good franchise in the proper location can translate into a license to print money... so why not?[/quote:5ii0papt] I tend to lean towards taking a more independent approach myself. This is because I like doing things my own way. There are plenty of success stories of small businesses that have dialed in there own concepts and marketed their business well... heck... that's how ALL franchisors are born. I see it as a toss-up really... relating to different personality types. Some investors don't want to think about building their own 'system', and would prefer to hit the ground running at whatever the expense - read franchise fees, royalties, etc.
Re: Is it worth buying a Dell computer with financing? - what you should know is that whenever you are buying any item and apying monthly you are definitely paying at least 50% more than if you buy it cash. I beleive on the long run it is worth buying the computer with finance if you are using it for business. My rules about buying things on credit is basically for business and nothing else.


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