Franchising - Is It For you?For many people the idea of running their own business is a distant dream. In reality, there are three options :-
The following are some tips on what to look for and where to get information on finding the right franchise for you:
Visit franchise trade fairs and check out directories and websites dedicated to franchising. Contact the British Franchise Association (BFA) at www.british-franchise.org.uk or by phone 01491 575 903.
Other sources of information
Armed with a list of franchise options go and do some field work – visit some existing franchises in another area and draw up a short list. Find out from them what works and what to avoid – pitfalls when they started out. Did the franchiser keep their promises?
Do you have what it takes to run a business or can you get people with the skills?
How much time can you devote to running the business?
What are your expectations?
Do you have the right temperament to be the boss?
Can you cope with working long, anti social hours?
Could you cope with missing the annual summer holiday for a couple of years while the business gets established?
Types of business
So you want to be your own boss? You now need to think about the type of business that you want to operate. Will it be in the services sector or a retail business? There are pros and cons for both.
Will you have a fixed location – such as a printing or retail outlet, or a mobile service operating a dedicated territory?
Retail units will require capital to be tied up in stock.
With a retail operation you probably will need staff – this gives rise to employment law issues.
The costs of leasing premises and business rates have to be considered.
Service businesses may be operated from home – a saving in overheads but long hours.
Working from home/alone can be lonely – are you self motivated?
How much capital do you have to invest in the venture? If you have proven business experience then bank loans may be possible. In addition, the DTI operates a Loan Guarantee scheme that may be available in certain instances.
Given the wide choice of franchises available operating in most business sectors you need to do your homework as each will have a different pricing structure – they don’t all cost the same.
Having drawn up a shortlist of potential opportunities undertake further research. Contact the BFA; your bankers, accountant, solicitor and business link – they all should be able to provide you with guidance not only on franchising but also on the skills needed to run a successful business.
Obtain the relevant brochures and marketing information from each of the shortlisted franchisers. Find out how long they have been in business for? How long have they operated the franchise network? Their last report and accounts are available from companies house – but will only give a snap shot of the business at the time the last reports were filed. Do the accounts indicate that they have the financial resources to support a successful franchise network? Is the franchiser a member of the BFA?
One exciting opportunity is to sign up with a new franchise – such arrangements often are less expensive on the basis that the business model may not be proven unlike some of the established franchises. It is very difficult to evaluate the quality of newly created franchises – are there any other brands offering similar services that are successful? Has the new franchise been piloted and if so what were the results? Was the franchise set up using professional advice? There are specialist consultants that provide advice to businesses on how to take a successful business model and turn it into a franchise operation.
The market place
Is there a demand for a fifteenth hairdresser in a small market town? How viable is your potential franchise, brand, product or service – is there a local demand in your area? How many competitors are there within a 15 mile radius ? Are there enough customers to support you and your competitors?
Specialist legal advice
Before signing any contracts you should invest in obtaining good legal advice from an experienced franchise regulations solicitor. They will, amongst other things, examine the franchise agreement and associated paperwork and give guidance on those important aspects requiring your attention.
If you fail to plan then you are planning to fail. It is far better to take your time and carefully consider all aspects and obtain input from your partner or spouse – set realistic expectations and review regularly.
Don't sign anything without expert legal advice.
Where a bank loan is required to part fund the franchise, do not sign any franchise agreement until after you have the bank’s agreement to lend the funds.
For retail franchises, do not enter into any binding commitment to take on premises until you have the bank’s agreement to the loan and you have signed the franchise agreement.
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