Taking the leap into franchising

Nigel Toplis details the steps and the processes you need to consider when you make the leap from being employed to becoming a franchisee

Being employed gives you a certain comfort in that you have a position and a role that is defined, and remuneration for carrying out said role. By and large, however, employees have very little say in the vision, strategy and management of the company. When you take on a franchise, however, the situation is almost 100 per cent reversed. In a franchise business, it is you who makes the decisions, you who will have a vision and a strategy to devise and follow, and you who takes responsibility. You are, though, not alone and good franchising comes from the successful marriage of the franchisor and the franchisee.

With franchising, you get all the benefits of ‘corporate’ head office support and you are part of a network of people who can swap/share best practice, advice and insights. The franchisor is there to provide guidance and advice, but also training, marketing tools, programmes, collateral, procurement (if relevant), plus technical and sales support throughout your period in the franchise. Franchising is a commitment and should not be rushed or done on the spur of the moment. Essentially, there are six steps to selecting the right franchise.

Step one: Suitability
A good franchise should have:
•    A proven business history
•    Documented systems
•    Effective training
•    Security of tenure
•    Ongoing support structure
•    And, ideally, they will be members of the British Franchise Association

If a franchise doesn’t offer the above then you really should question whether you want to proceed, but assuming the above are in place your next stage is to match your requirements with the market availability.

Step two: Investment level
A franchise is an investment – it is not a job! You need, therefore, to determine exactly how much is required to invest and, most importantly, how much you’ve actually got. There is no point taking on a business that will only generate half of what you need. Also, beware of over extending yourself – be sure you can raise the requisite funding and make the repayments through the business.

Step three: Evaluating the industry
Evaluating a franchise is all about asking the right questions – such as:
•    Is it a good market?
•    Can demand be sustained?
•    Is the industry growing or declining?
•    Do a few key players dominate? If so, do they compete aggressively?
•    How do competitors build market share?
•    Do other industries have products and services that could make inroads into this one?

Step four: Make the comparison
Hopefully, you have by now found a number of franchise companies that transcend the initial aforementioned obstacles. That is, they have proven history, good systems, effective training, bfa membership etc; they are all businesses you think you may be interested in and for which you have some or most of the skills necessary; the investment required is within your
compass and the industry meets your specification in that it is large, growing
and sustainable.

Next, you need to compare and judge each opportunity. In order to do this, you should meet with the franchisor and ask about:

•    Profitability – ask for three years of reports and accounts.
•    Knowledge – question them on the market and market trends.
•    Success – how long have they been in business/how successfully?
•    Vision – are they a serious player, or full of platitudes?
•    Support – ask to see detailed support plans; examine the company organisation chart; note improvements made to their systems (or lack of!)

Speak to franchisees. Most franchisees are more than willing to talk about their business, why they joined, what their aspirations are and how they’re doing. The franchisor should let you have access to a variety of franchisees.

Step five: Take advice
The franchise agreement is a legal document and a specialised area, and it is always recommended that you use a solicitor with proven experience in franchising. A reputable accountant can advise on how to set the business up, the various tax implications, business planning and ongoing financial matters.

Step six: Decision time
Ask yourself 10 final questions:
•    Do your strengths and weaknesses match the success criteria?
•    Can you really afford the business?
•    Is it a good investment? Will the ongoing rewards meet your expectations?
•    Is there potential for expansion?       
•    Can you take the pressure?
•    Are you confident in the franchise company?
•    Are you going to enjoy yourself?
•    Are you prepared to work very hard to achieve success?   
•    Will you follow the franchisor’s system?

If you have answered ‘yes’ to all these questions, then you have chosen your preferred franchise. The selection process is often the most challenging aspect of becoming a franchisee but, if you follow the above step-by-step process, you will be in a stronger position to move forward.

Nigel Toplis is managing director of  Recognition Express, ComputerXplorers, The ZipYard and Kall Kwik, and past chair of the British Franchise Association

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