Six steps to franchising

Nigel Toplis on how to prepare before meeting the franchisor

Franchising is not always the easiest thing to get into. You have to ask yourself questions such as: ‘where do I start?’, ‘who can give advice?’ and ‘what business can I open?’. With franchising you receive the benefits of head-office support and are part of a network of people who can share best practice, advice and insights. The franchisor is there to provide both guidance and advice, plus training, marketing tools, programmes and technical and sales support throughout your period in the franchise.

But with almost 900 business format franchises in the UK, how does a prospective franchisee select the right franchise? It can be, therefore, both difficult and confusing at times, and it is certainly something not to be rushed or done on the spur of the moment.

Essentially there are three aspects to consider:

1. What research you need to carry out and how you prepare for a meeting with a franchisor

2. Proving to a franchisor that you have the wherewithal to run their franchise

3. Assessing what a franchisor is looking for in a franchisee In researching, there are six steps to selecting the right franchise:

Step 1 Assess Suitability
A good franchise should have a proven business history, documented systems, effective training, security of tenure, and an ongoing support structure.

Step 2 Investment
A franchise is an investment – it is not a job. You need therefore to determine exactly how much you need to invest and most importantly how much you’ve actually got. There is no point taking on a business that will only generate half the amount you need. Also beware of over-extending yourself – be sure you can raise the requisite funding and make the repayments through the business. Franchising does mean you have to invest – not only time and energy, but also money. However, you might be surprised just how much you have, or can gain access to once you begin to consider your fund-raising options, be it cash, savings, shares, equity in
property, family help etc.

Step 3 Research the Industry
Evaluating a franchise is really all about asking questions – the right ones and lots of them. When considering which industry to get into, ask yourself the following: Is it a good market? Can demand be sustained? Is the industry growing or declining? Do a few key players dominate and 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 4 Compare the Franchisors
By now you will have narrowed down a number of franchise companies that meet your requirements. Now you need to compare and judge each opportunity. Analyse each franchisor by consulting resources such as the British Franchise Association (bfa), Companies House and franchise magazines and asking the following questions:

• Are there any other franchisors in the industry and if not why?
• Is your preferred franchisor the largest operator?
• How often does a consumer buy the product or service?
• Do the products or services enjoy repeat business?
• What is the typical value of a sale and the typical profit?
• Does this franchisor seem profi table? Does this franchisor offer the best potential for growth?

Step 5 Seek Advice
It is imperative that you seek professional advice when thinking of buying into a franchise business. A qualified adviser can assist you in understanding the small print and help you to prepare a business plan.
When it comes to understanding the franchise agreement, speak to a solicitor with proven experience in franchising. A good accountant can advise on how to set the business up, tax implications and business planning.

Step 6 Make a Decision
In order to do this, ask yourself some 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?
• Are you confident in the franchise?
• Are you prepared to work very hard to achieve success?
• Will you follow the franchisor’s system? 

If the answer is yes to all of these, then you are ready for the next stage – which is meeting the franchisor.

Certainly the franchisor will be interested in your background, experience and skill base. But more than this they will want to see evidence that you are serious about franchising and, most importantly, serious about their business. So, If you have gone through the six steps detailed above then you need to tell the franchise representative this. Explain the research you’ve undertaken and the results you’ve unearthed, and you will be onto the right footing with your chosen franchisor.

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