Speaking to franchisors is an important part of the due diligence process when looking to invest in a franchise. This will be your opportunity to speak openly about your queries and discover if this franchise is the one for you.
What is the total cost of the franchise?
It is important you know how much you will be investing into the business in total. Most franchises will require an initial franchise fee and an ongoing fee. But also keep in mind set-up costs, marketing costs, working capital and legal fees. As each franchise operates differently, make sure you ask for the total investment cost (including VAT).
What support do you provide your franchisees?
As a franchisee, your franchisor is there to support and train you. Many franchisees come from a different sector than they invest in so it is important you are supported in all areas as necessary. This may include support in winning customers, marketing or key skills needed to do the job in hand. Find out how this training and support is given and how long the initial training will be.
How much can I expect to earn?
As for any business, it may take some time to get your franchise off the ground and start making a profit. Ask the franchisor what the reasonable estimate is for potential earnings. This will also help to tell you how long you can expect to work the franchise until you start seeing a return on your investment and how many years you will be investing.
May I speak to existing franchisees?
You want to be able to get a full understanding of the business from all viewpoints. Often franchisors will encourage you to speak to existing franchisees and you should not pass up the offer. Ask the franchisor who to speak to and how you can get into contact with them. This way to you can get an understanding from someone who has been in your position and is now working in the franchise you are interested in.
What will happen when the Franchise Agreement comes to an end?
Although you will just be starting out, it is important to keep in mind your exit strategy for when the time does come. Franchise agreements are often 5-10 years long but can be longer depending on the type of business and level of investment. You will want to ask the franchisor whether you will have the option to renew, or if you are able to pass on the franchise to someone else if that is part of your plan.
In these times of economic change many people are considering what they might do with their futures.
Many of us are driven by motives of ambition, redundancy or even preparation for retirement and are looking to franchise business as a potential way forward. Clearly franchise business and self employment is right for some and not for others.Below are some tips for finding the right franchise for you. The tips will also help you determine if infact franchising is right for you or not.
When you have completed the above steps you will be in a position to decide what franchise is right for you. It will then fall to you and the franchisor to sign contracts, pay fees and set up training and your franchise business launch programme.
Take your time, find the right franchise for you and work with the franchisor and your customers to build your own successful business.
It is always advisable to look at a number of franchise options before making a commitment. Essentially you need to know how much capital you can access, where you want to trade and the type of market you are interested in.
Be careful not to stick too closely to markets that you already know or have a lot of experience in. Most Franchisors actually prefer to find franchisees that have no experience in their sector.
The reason for this is as a new franchisee who is ‘green’ to the market, you will be very teachable and will therefore follow the franchisor’s proven system closely.
Franchise owners consistently state that an enthusiastic following of their proven system produces the most successful franchisees. It is, after all, the proven system that separates the franchisee business owner from the ‘have a go Joe’.
Following the proven know-how will always be the best route to success for any franchisee. That is why a franchisor’s intellectual property is so valuable. It quite simply is what separates you from the rest.