How to choose a franchise
There are never any guarantees in business. However, you can increase your confidence and opportunities for success by following these key steps when considering franchise opportunities.
Step 1 – bfa members
Joining a franchise could be one of the major and most important investments that you make in your life – not only in financial terms, but also in terms of your own time and commitment.
Whilst it is not a guarantee of business success, bfa membership does ensure that the franchisor has been independently assessed using established membership criteria against a code of ethical franchising. Only those that pass our rigorous process can join – many are not able to reach and uphold the standards we set.
Step 2 - Your finances
Levels of investment range greatly from small sums, that you may already have available, to substantial funds for which you may need a bank loan.
Assess and understand, from the beginning of your process:
What you can afford to invest; and
How much you are prepared to borrow
Remember to consider requirements for working capital while you are establishing your business without the benefit of any immediate profit.
A good starting point can be to evaluate your net worth.
Work out the returns that the franchise will generate for you – ensuring that the figures on which they are based are verified, historical trading figures of existing outlets
Make sure that the business can support your lifestyle. Do this before you become passionate about something that you cannot afford or that cannot support you or your family
A small number of bfa accredited Banks with specialist franchise departments and dedicated teams work with franchise business loans. We recommend that you consult these franchise specialists rather than your bank manager.
Step 3 - You
What are you good at doing?
What do you want to do?
What will your family life and personal circumstances prevent you from doing?
For example, if you are not happy interacting with the public, then a consumer facing business is unlikely to suit your needs. You must be comfortable with the commitments needed to make your new business a success
Franchising enables you to develop your current skill set, or become your own boss doing something about which you are passionate. With full support and training, think about what you are good at doing - and can take on wholeheartedly.
You also need to consider the support and understanding of those around you – such as friends and family – which some franchisors like to evaluate themselves as part of their recruitment process.
Step 4 - Research the Market
It is fair to say that aspiring business owners often enter franchising having pursued their dream of owning their own business but neglect to fully understand the business they’ve chosen – and the market in which it operates.
Speak to the appropriate trade association for the operational view of the type of business in which you are interested. For example, if you are interested in estate agency, you might speak to the National Association of Estate Agents
Use the internet to research the business and business sector in which you would like to become involved
Step 5 - Research the Franchise Opportunity
There is much due diligence to be undertaken on your chosen franchise opportunity.
Due diligence means undertaking a comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential. This will include the standard and delivery of training and support, daily operations, ongoing fees, the people involved.
Speak to current franchisees; but
Don’t just accept the ones whose names you are given by the franchisor
Look for franchisees with a background like yours – or ones at differing stages of development in different areas
It may be difficult to get everything you want but they are likely to be sympathetic having been down the route you are taking.
Also research the franchisor.
What is their background?
How has the business grown?
Have they lost any franchisees?
Evaluate the support, the value in the costs – and the quality and type of Franchise Agreement
At the same time, the franchisor will be assessing you to decide whether you match what they want.
Step 6 - Professional Advice
There are many professional advisors, accredited by the bfa, who specialise in all aspects of franchising. These include consultants, accountants, legal advisors, banks, franchisee recruitment consultants and the media. They are experts in franchising and will prove invaluable in making sure that you are taking the right steps and don’t miss any vital information.
When you have decided which franchise to join, you MUST have the Franchise Agreement – the contract between you and the franchisor – checked by an experienced franchise lawyer BEFORE signing it so that you understand all your obligations and responsibilities that will be required of you from start up to sale of the franchise business.
Step 7 - Be Sure
Take your time over your due diligence.
Make sure you assess and re-assess everything and complete the research before deciding to realise your dream
Keep in mind that you are investing in your future and making a long-term commitment – usually a minimum of five years, sometimes longer. Therefore, it’s essential to be 100 per cent comfortable with your decision and you don’t make an expensive mistake
A good franchisor won’t pressure you into a decision. They understand the substantial commitment required and only choose those who match their franchisee profile to join their network.
Other useful information: