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Top tips on starting up as a franchisee

Written by: Mandy Garner

Article Overview: Have you ever considered setting up as a franchisee? It could be the answer for you if you want the freedom of being your own boss, but also the security of working within some sort of established framework. Here are some tips on what to consider before you take the plunge.

Top tips on starting up as a franchisee

You may haveseen franchises advertised, but might be a bit unsure about what they are and be worried about the cash needed to fund them. Many businesses now run as franchises, from language teaching to family magazines, and every business is different from another, with the amount of money you have to invest varying hugely between different types of franchise. Effectively, by purchasing a franchise you are buying a business off the shelf. This means your business can be set up in days or weeks and can be easily expanded, depending on the local restrictions in your contract, for instance, if other franchisees operate in your immediate vicinity. On the pro side, franchises offer more flexibility than traditional work as you are basically self-employed, but you have the support of a company behind you. However, you need to remember that you are basically leasing a business from the franchise owner so you are not as free to make decisions about how you operate as you would be if you were in control of all aspects of your business.

Below is a guide to some of the issues you need to consider when setting up as a franchisee:

1. Are youthe entrepreneurial type? Do you work well on your own? Being a franchisee often means hard work, involves a range of skills, from marketing to budgeting, and you need to be well motivated. Be clear before you start what your motivations are and whether you have the get up and go to make a business work. Be honest about your skills.

2. Although franchisees work alone, they are also part of a wider team to which they have to report back regularly as well as pay regular fees. Are you a team player or would you prefer a more traditional approach to self employment?

3. Consider carefully what type of franchise appeals, what kind of franchise your skills suit you to and research your market thoroughly. Can you make it work in your location? What is the financial outlay? Franchises can vary enormously in terms of what they require you to pay - not just the initial outlay, but ongoing charges. Include not just the sums mentioned but some sort of contingency budget in case things do not go as smoothly as you hope.

4. Being a franchisee means you will get initial support and will have a network of people in a similar position who can help you, but you will ultimately have to make your own decisions about how you run your particular franchise. You need to be able to work out a business plan which clearly outlines your targets, your budget and how you will develop your business long term, including issues such as taking on and managing staff.

5. Many franchises can be run from home and the same pros and cons apply to this as to other businesses. The cons include feeling isolated and finding it difficult to differentiate between home and office. There are ways around these, for example, by arranging lots of face to face meetings or by having a separate home and office phone line or a separate space reserved for work. Ensure your office space is comfortable and meets health and safety standards.

6. Check that your mortgage lender or landlord allows you to use your home as a business and whether your local authority will charge you business rates. Check that your buildings and contents insurance is covered if you operate a business from home.

7. Before you sign any contract to become a franchisee, you need to check the small print. Issues to look out for include: any restrictions on how you operate [the franchise may, for instance, seek to limit what you can do to protect its own intellectual property or place limitations on the area you can expand to], ongoing financial commitment [most franchises have an annual cost which may need negotiating in the early years], a get out clause if things go wrong [check if there are any financial penalties for opting out before the end of the minimum time period] and any help and support offered outside the initial welcome period.

8. As a franchisee, you can choose to operate your business in whatever business format suits you, from sole trader [best for smaller franchises] to a limited company. You need to investigate what is best for you.

Related Articles
  Benefits of Franchising
  Franchisees and The 90 Day Window
  Maintain a good working relationship with your franchisor
  What makes a good franchisee?
  Franchisee/Franchisor Relationship Requires Mutual Trust, Respect

Article Tags: amount of money, business work, buying a business, decisions, family magazines, financial outlay, flexibility, franchise owner, franchisee, franchisees, franchises, language teaching, marketing, motivations, self employment, team player, traditional approach, vicinity



Related Forum Posts
Dispute between Supplier and franchisee - This very much depends on the attitude of the franchiser. A good franchiser would be more than a little concerned about a franchisee not paying the bills purely from the perspective that it might tarnish the brand name. However, be aware that this might be struggling franchisee with a company that couldn't give two hoots about you being owed money. Personally I would be inclined to approach the person first and inform him or her of your intentions to talk to the franchiser before you actually do. This at least gives the franchisee the chance to rectify the situation.
Dispute between Supplier and franchisee - The franchisee is a totally legally separate entity from the franchiser, and frankly it is no business of the franchiser. And the most important reason you are also likely to totally alienate the franchisee. I don’t know enough about your relationship with franchisee to comment on the rights and wrongs: but I do know this - If there was even an ounce of "right" on my side in the non payment, and certainly if my problem was the franchise model was not working, I would make it my mission to delay payment all the way to the courtroom door anyone who was so sneaky as to go behind my back to the franchiser.
Franchise Territories - [quote="franchisebrief.com":1dfdbmhp]This information will be included in the UFOC. If the UFOC states that there is no protected territory, then I would be suspicious. If UFOC states that each franchisee will have its own territory, then there should not be any problem.[/quote:1dfdbmhp] Any franchises that I'm familiar with have a territory or distance provision that prevents franchisees from overlapping their territories. This is only a problem when you have an underproducing franchisee - but they should also have a provision to give a franchisee a set amount of time to make a go of the location and territrory. Shri
Re: Franchising Brokers vs Franchising Consultants - Franchise consultants are free and work with you without any obligation. they do not work for any one franchise but do get a percentage of the franchise fee when a franchisee that was registered with the franchise came from the consultant and the franchisee signs. They will try to match up your interests and skills to franchise businesses that are right for you. They can explain franchise guidelines and help you in any way they can. Franchise brokers usually get paid by the client and/ or franchise (generally get some type of commission). Additionally, they can get points or referral fee off the deal if they refer you to a lending resource too after they sell you on a franchise. Typcally they will try to sell a prospective franchisee on a larger deal so they get a larger commission.
Starting a Online T-shirt Company - Hey, I am very interested in starting a T-shirt company. I know it will be really hard because of all the struggling T-shirt companies already out there. I was wondering if you guys had any tips for me to be successful. I am already working on a site, I have a few designs for my shirt. I know one of your tips will to have nice looking shirts, and I am already trying my hardest at that. I was thinking of spending a lot of money on advertising and do you guys think this will pay off? And would it also be better to spend (Ex) $100 a month on one advertiser or spend $50 each on two different advertisers. Thanks.


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