10 Things To Consider When Buying A Franchise
Stephen Thorns - Managing Director, Qutis Clinics
Are there really 10 things to consider? Or are they really only two or three things that are that important? I will let you make up your own mind.
What to consider or prioritise depends, on what kind of person you are. Are you high risk or low risk for example?
As a new franchisor with recent experience of recruitment, I would consider the following when buying;
- How much have I got to invest?
This is in two parts; how much of my own funds do I have and how much am I prepared to borrow? It is vital that you match the amount of funding you have with the costs of the franchises you’re considering. Every piece of research suggests that one of the main reasons for business failure is insufficient capital. My other question would be; am I prepared or able to remortgage my house and release say a further £30-£50,000? - Where are my natural skills and possibly more importantly what would I be keen to learn?
- Which franchise businesses operate in a growing market?
A rising tide lifts all boats and it is easier to grow business when the market is growing. Obviously, one needs to take account of competition but this can be a double-edged sword. The absence of competition, may suggest there is not the market that we thought. On the other hand, lots of competition may mean the market is buoyant and we could take customers from our competitors. In this latter case it is important to understand how price sensitive the market and business may be. The best way to win a price war is not to enter. - Where do I get the best return on my financial investment and time?
- What kind of customers do I want to serve?
- How well does the franchise fit with the kind of lifestyle I want?
- What is my exit plan?
- How much could I sell my business for and to whom?
- and 10. What two final points have I not listed that are important to you?
Stephen Thorns is the founder and managing director of Qutis Clinics, a new franchise model based on our success owning and operating skin care clinics in Oxfordshire since 1998.
Buying a Franchise: 3 Common mistakes to avoid
Joel Caws - Technical Director, Select Your Franchise
Its clear that franchising can be a great way to start up a business, however, you can find online alot of horror stories about people losing money, their franchise business failing, etc. Obviously there are no guarantees but with some careful consideration and research, you can minimise the possibility of failure as much as possible and do your best to ensure your franchise opportunity is a success. There seem to be several commonly recurring issues so heres a few ways to avoid them:
Mistake 1: Not checking the authenticity of the Franchisor
I’ve come across postings online where it appears that people have thrown money at a downright scam!
Remember that you will likely be giving a substantial amount of cash to the franchisor as start-up ‘franchise fee’. In addition to this, you will be building a long term business relationship with them so its important to know as much about their background and history as possible. Online is a great place to search for the company and research its history. Its also worth checking the Directors backgrounds to see what other companies they have been, or still are, involved in. Other good sources of company information can be the Companies House website, talking to the franchise departments of the major high street banks and also specialist franchise consultants who might be able to give you some industry opinion on any franchise you are considering.
Mistake 2: Not speaking to those that are already doing the job!
If you are buying a product then the best reviews and recommendations come from friends and others who freely share their opinion on it. From this you can make a well informed decision of whether you will buy a product. The same is true for a franchise. You should obtain a list of a few franchisees from the franchisor as ‘references’. Make contact with them and if possible arrange to meet them to get a feel for what you would be doing. They are likely to be your best source of feedback on how supportive the franchisor is and how well the franchise business performs for them on a day to day basis.
Mistake 3: Assuming that a Franchise carries a guarantee!
There can be a feeling that because a business is a ‘franchise’ it is somehow a sure fire winner. The bottom line is that you will be the one who decides whether your business succeeds or fails. A franchise business is purely a business system that has been proven to make a profit if it is ‘worked’ correctly. The key here is the word ‘worked’. Like any other business, a franchise requires alot of hard work and commitment. Ensure you have complete backup and support of your family as it will require alot of time to build a successful business.
Tags: Buying a franchise, franchise business, franchise mistakes, franchise opportunities, joel caws
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
