Franchise FAQ

Q. ARE THERE ANY SPECIFIC CIRCUMSTANCES WHERE THE FRANCHISOR IS ALLOWED TO TERMINATE THE AGREEMENT?

Answered by Terry Mullens (pictured second from top), Recruitment Director for Revive! Auto Innovations UK LTD

TERRY SAYS: Termination of the agreement is an extreme measure and should be considered as a last resort after all attempts at resolution have been exhausted. That said, it should not be something that a franchisor is afraid of, as it may be necessary to protect the brand and other franchise owners within the network.

One example of this may be where a franchise owner commits a fraudulent act and in many instances franchise agreements would allow for automatic termination of the contract. Another example may be where a franchise owner's poor workmanship or service becomes damaging to the reputation of the company and may affect the livelihood of other franchise owners. In this instance, a franchisor must first try all means available to them to improve the performance of the errant franchise owner but may in the end have to act firmly to protect their brand reputation.

Q. HOW CAN I GET A REALISTIC IDEA OF HOW MUCH IT WILL COST TO SET UP THE FRANCHISE?

Answered by Nick Bolton, Founder of The Christmas Decorators

NICK SAYS: Start by requesting a franchise prospectus and make sure you read it and understand the basic outline of the figures. If the initial fee was for example £15,500 there are two different points of view on how you place these figures into a forecast.

If you can afford it, you may want to make a one off payment. Bank finance can offer the opportunity to pay this sum back over a three year period where interest would make your annual payment approx £6,300 per year. If you drop this figure into your cash-flow forecast, does that make the annual figures/profits more attractive and allow more free cash?

If it looks like an attractive opportunity to you then we recommend you arrange a meeting with the franchisor. It is also helpful to talk with existing franchise owners and find out if they ran into any hidden costs.

Ultimately, the decision is yours and doing in depth research in your own territory is key to backing up any figures or claims made by the franchisor. I strongly believe that you should only ever enter into any business if you can comfortably afford it. Cutting things too close to the bone is always going to create stress and anxiety instead of allowing you to concentrate on growing the business.

Q. HOW DO FRANCHISORS ASSESS THE SUITABILITY OF PROSPECTIVE FRANCHISE OWNERS? IS THERE NORMALLY A SELECTION PROCESS? IF SO WHAT DOES IT ENTAIL?

Answered by Vincent McKevitt (pictured bottom), Founder and MD of Tossed

VINCENT SAYS: Franchisors will be looking to see if there is a fit between the potential franchise owner and its business. While a franchise owner may not be suitable for one business, they may be for another. At Tossed this selection process involves a number of stages:

  • Telephone interview
  • Presentation and visit to a Tossed store followed by an interview
  • Interview with the Managing Director
  • Two day trial, which involves working in a store to make sure applicants are hands-on and focused on providing good customer service. We have found that some people can interview well, but are not good when it comes to practise.

Franchise owners do not necessarily need any previous experience in the business as any decent franchise system will have a good training programme and systems in place, designed to equip the franchise owner with all the tools they need to run their business. At Tossed, we have an initial seven week training programme, which franchise owners go on prior to opening their stores followed by four weeks of on-the-job training once the store is open.