Researching your franchsise opportunities
Drawing on 25 years of experience in assisting franchisees to select the right franchise, The Franchise Magazine publisher Roy Seaman offers his top 10 tips for getting your franchise research right
1 - Establish your Funding
Start your franchise search by developing a clear idea of your liquid funds available for investment. Should you have less than £10,000, forget franchising! The lower the cost of a franchise, the greater the risk. All genuine business format franchises that provide comprehensive initial, as well as ongoing, training will require an initial investment of at least £10,000.
Also, allow yourself at least three months and a budget of around £1,500 to cover essential subscriptions to publications such as this publication and The UK Franchise Directory, visits to franchise exhibitions and franchisors' head offices, telephone calls to franchisors and franchisees, and the professional services of franchise consultants, solicitors and accountants.
2 - Conduct Market Research
Read and inwardly digest the advice and guidance offered by the franchise press as well as franchise websites such as Franchise-Group.com, TheFranchiseMagazine.net, British-Franchise.org and UK.BeTheBoss.com. More advisory publications are available from lawyers, accountants, government agencies, franchise consultants and high street banks.
3 - Visit Franchise Exhibitions
Visit at least one franchise exhibition that is supported by the British Franchise Association. Major events take place in London, Manchester, Birmingham, Glasgow and Dublin throughout the year providing an opportunity to meet the managing directors and head office teams behind hundreds of franchise brands offering opportunities nationwide. Use resources such as the Franchise Buyer's Checklist (in the Franchise Magazine) to put together a list of questions to ask, pick up as much material as you can and keep your wallet in your pocket.
Franchise Exhibitions are an opportunity to widen your franchise knowledge, not sign deals on the spot that you may repent later.
4 - Determine your Suitability
Once you understand franchising assess whether you have what it takes to become a successful franchisee. Are you motivated and hard working enough to put the hours in to get the business off the ground? Do you have the management skills to keep all your plates spinning? In the rush to pursue the dream of running your own business, you must be honest about your own capabilities. While a franchised business benefits from the training and support of a franchisor, its success or failure is still firmly in your own hands.
5 - Accumulate Knowledge
When you come to analyse all the materials you have collected, make sure you research every important aspect of the opportunities: the franchisor's track record, piloting experience and financial status; the territorial rights, property obligations and intellectual property rights of the franchise; and the initial and ongoing training, support, and most importantly profit and loss projections.
Beware of sales talk dressed up as information. Talk to established franchisees in the network and check the validity of the franchisor's claims, particularly checking whether the franchisor's financial projections are easily attainable, or attainable at all.
You'll also need to pay attention to your own prospects of replicating the success of the franchise in your area - check the potential competition, assess the number of prospective customers and test to see how high the demand will be.
6 - Value the Brand
Part of the franchise fee will reflect the value of the franchisor's trading name. Whereas some brands, such as McDonald's, are instant crowd pullers, others will command less market recognition. If the franchisor's name is not widely known, ensure you are not being charged too much for the privilege of owning and operating its franchise.
7 - Double Check Every Claim
Never believe that status is a guarantee. The franchisor's brochure, profit projections, advertisements, glossy head office manuals (printed and online) may all look very authoritative, but they could conceal forms of misrepresentation or weaknesses. Don't accept anything at face value, however prestigious it appears. Pedigree, big cash backing or being a plc are not guarantees for success, so you must always remain alert.
8 - Talk to Established Franchisees
Access to bona fide franchisees will provide the best information in your franchise research. This is a chance to determine whether the franchisor's systems work in practice and if it honours promises on training, product marketing, working capital requirements and earnings potential.
Be wary of a franchisor reluctant to provide you with access to the whole network of franchisees - a limited list is likely to name only the most successful franchisees, providing you with a skewed view of the potential of the franchise opportunity.
9 - Consult the Banks
Many high street banks have very valuable Franchise Departments. Consult with not only your own bank, but with others as well when you are weighing up a franchise to make the most of the free knowledge and advice available. The meetings will provide you with opportunities to assess which offers the most attractive terms for your loan requirements, and obtain further advice and guidance in relation to specific brands of interest.
10 - Have the CONTRACT Checked
The Franchise Contract will become your single most important document and must be studied point-by-point before you make the decision to proceed. You should use only law firms that are established BFA Affiliate Franchise Lawyers, and ideally look for the most years of experience. Make sure you receive the lawyer's opinion in relation to the agreement in writing.
Taking these 10 steps should allow you to identify a franchise opportunity which you are 100 per cent confident about, and embark on a very successful and long-term business relationship.