Franchise Business: 5 Things to Consider
Joel Caws - Technical Director, Select Your Franchise
I’ve read many stories online about those taking on a franchise and losing out as a franchisor experiences financial trouble or, worse, wasn’t an honest franchise operation in the first place. I don’t doubt that there is truth to many of these stories but on the other side of the coin there are successful franchisees trading today with good profitable businesses. It might seem that some are lucky and some are not, however there are some things you can consider during the buying process of franchise to minimise the possibility of being one of the ‘losers’ and maximise the potential of you becoming one of the success stories.
Consider these 5 points when researching a franchise of interest.
1. The opinions that matter
Who better to tell you whether a franchise opportunity is good or not than those who have actually run it themselves. The Internet is becoming an ever increasing voice when it comes to service levels experienced by customers on products and services. A quick search online for the franchise with ‘review’ tagged on the end will usually give plenty of results posted by people who have experienced the franchise first hand, both good and bad. Getting a list of current franchisees from a franchise you might be seriously interested in is another important way of getting some good insight as you move along the buying process.
2. Support & Training
Make sure you visit the head offices of any franchisor you consider. It will give you some good insight into their operation and while your their you can check out any training facilities and material they have available. Again, its an important question to ask their current franchisees of their experiences as a good franchisor will provide as much support and training as required to give their franchisees all the tools they need to succeed.
3. Reputation and Brand
Have you heard of the brand? And what kind of reputation do they have? This is common sense really but its also worth bearing in mind that there are lots of smaller, lesser known brands which may still have good reputation and still worth considering. Not all franchisors have the capital to brand themselves strongly on television or billboard but this is not a reason to discount them if you can find a track record of industry reputation and integrity.
4. Banks Opinion
The franchise sections of the major banks are another great place to get an opinion of the franchise you might be considering. Unless you have large amount of cash already in the bank, it’s likely that the bank will be involved as part of the franchise investment since the majority of potential franchisees will need to borrow money to finance their new franchise. The banks willingness to lend gives an indication of the security they have in any particular franchise. If the franchise is well known to them and has a good track record they will be eager to lend as oppose to a franchise that in unknown to them or has a poor track record in their experience. The latter obviously represents more risk to the bank and they will be more cautious to lend.
5. Franchise Associations
Most countries have a franchise association of some sort which can provide some level of security when it comes to looking at buying a franchise. Their job is bring a level of trust to the franchise market as the franchises they approve as members usually need to pass some basic checks to ensure they have proven systems with a track record of success. It’s wise to check with the franchise association in you country to see if the franchise you are considering is a member and what opinions they might offer you.
Finally, the good old fashioned gut feeling can’t be under-estimated! How do you feel when you meet the franchisor, the people behind the franchise? Do they inspire confidence and trust with you? Would you feel comfortable working with them? Don’t be taken in by promises of fast, quick cash… this simply isn’t how the majority of businesses work. Instead seek out a franchise that has a more realistic approach about building a solid long term business with you.
Tags: Buying a franchise, franchise, franchise business, franchise opportunities, Franchise system, franchising, joel caws
February 8th, 2010 at 8:32 pm
Great subject for creating this article. It was enjoyable reading.