When thinking about diving into franchise investment, there are some important things to mull over. First off, take a moment to consider if you’re genuinely passionate about the service or product the franchise offers, as your enthusiasm will be your driving force. Next, think about your rapport with the franchisor; it’s crucial to have a positive and collaborative partnership with them. You’ll also want to chat with existing franchisees to get the lowdown on their experiences and the support they’ve received. 

Now, let’s talk money. It’s essential to understand all the costs involved in getting started. This includes franchise fees, equipment, training, marketing, and property expenses. Don’t forget to budget for working capital and your own investment, as most franchisors and banks require you to chip in. Oh, and putting together a solid business plan is a must – it’ll help you stay on track and secure funding. 

When it comes to the legal stuff, it’s a good idea to have a franchise legal expert on your side. They’ll help you navigate the nitty-gritty of the franchise agreement, ensuring you’re clear on your rights and responsibilities. They’ll also watch out for any tricky clauses and make sure everything aligns with ethical standards. 

Your solicitor will spell out the fees and the timeline, and they’ll guide you through the process with a friendly touch. Think of them as your trusty guide, like a home inspector before you buy a house. 

Am I guaranteed to make money? 

A BFA accredited franchise has evidenced a strong and successful business model, which brings a certain level of confidence in your investment. The BFA NatWest 2018 survey found that after 5 years, franchising carried a 95% success rate, versus approximately 50% when going it alone. However, there are no guarantees as there are many external factors that contribute towards the success of your business. However, it is important to keep in mind that your franchisor wants you to succeed and will be there to support you and help you make a success of your business. 

Typical total start-up cost

The typical total start-up fee will include the following, where applicable to
the business:

• Franchise fee (the fee to use the brand and system etc.)
• Any necessary equipment (stationery, machinery, office equipment etc.)
• Any necessary initial stock
• Initial training
• Initial marketing or sales launch
• Any necessary property costs, including fittings (average)
• Any necessary vehicles (specified whether this is the total cost of the vehicle or the first repayment if on finance)
• Any necessary subscriptions/memberships/licences.
• Any necessary staffing costs (average)
• Any other element for the initial launch of the business
  • This figure does not include:
    • VAT
    • Working capital
    • Minimum personal investment

You may be able to cover the total start-up fee of a franchise purely from your own savings. However, a loan will usually make up part of the finance. When this is the case, most franchises will want you to contribute a minimum percentage of your own capital as part of the total finance. This will also be stipulated by the bank as part of their lending policies (most banks will require at least 30% of the total cost to be personal finance).

This fee will not include franchises which are resales (operations already being run by an existing franchisee), as purchasing a resale, rather than a new site, would skew the costs depending on the success and potential of an existing business.

Importance of a business plan

This document will serve several purposes:

• Alignment of franchisor and franchisee expectations
• Funding application for the bank
• A progress document to check the business is on track