Many people dream of being their own boss one day, but the generally accepted failure rates of new independent business start-ups (most will fold in the first 5 years) reflect just how difficult that dream can be to fulfil. There are many reasons for these disheartening statistics: some people just aren’t suited to it; perhaps their idea wasn’t good enough; maybe they got the branding wrong; perhaps there was never a market for the product or service in the first place?
The great news however, is that franchising offers a pretty fantastic solution to many of these issues.
Firstly, the business model you’ll be investing in has already been proven successful. Secondly, the owner of that successful business has created a training programme and resources to teach you how to implement that business model in your chosen territory. Thirdly, they will continue to support you as you grow your new business. Fourthly, you’ll be part of a franchise network of likeminded people all sharing best practice and supporting one another. Fifthly, you’ll benefit from sales and marketing tools and techniques that are proven to work.
And that’s just 5 reasons franchising vastly reduces the risk of having your own business. What do you need to do in return? Make the upfront financial investment required and agree to ongoing fees, follow the model precisely, abide by the terms of the franchise agreement and work really hard. That seems like a very fair arrangement.
So what do you need to take into consideration when trying to find your perfect franchise opportunity?
Here are our top 5 tips:
1. Sit down with a pen and paper (or, your preferred technological equivalent) and write down the all the things you want to get out of having a franchise – more time to do A, less need to have to do B, etc. Then, list the things you love doing – being outdoors, solving problems, dealing with people, being part of a team, teaching, selling – be honest. Now list the things you really don’t enjoy doing – dealing with people, working in a team, selling…
Also, consider how much time and effort you’re really prepared to put into your new business – are you driven by the desire to make serious money and happy to work around the clock, or are you driven more by a change of pace and work/life balance? Only you know the truth. Finally, it’s time to do some sums. What financial returns do you need from this business – how much does it need to generate for you monthly, what will you need to sell it for to retire, how much do you have to invest, for how long can you meet your financial commitments before your new business can pay you – very few will see you making money from day one.
Right, now you have a great (and honest) candidate profile of yourself. When you find a franchise opportunity that excites you, use the profile to assess both its suitability for you, and your suitability for it – and again, be honest about it. Buying a franchise is not the same as taking a punt on a new job that you can just walk away form if it turns out you don’t really like it.
2. Really explore what’s out there. Once you’re happy that becoming a franchisee is something you like the sound of, don’t just look at one or two – you’ll be amazed at what types of businesses have been franchised from Dog First Aid Training to Psychology Clinics. It’s all about finding the franchise that fits you best. So where do you look?
Well you’re already on the BFA website, so once you’ve finished making your list in point 1, go and explore all the brands that are in membership. Then, Google is usually everyone’s go-to starting point for finding information. There are a lot of franchise portals out there – you’ll see some of the brands popping up again and again, while others appear on one only, so shop around. It should be fairly straightforward to request information from the franchises you like directly from the portals. Once you find a particular sector you like, you can use Google to find all the brands in that category and visit their websites. As you begin to develop a shortlist, you need to do a deep dive on the ones you like – their website, social media accounts, appearance in franchise media, appearances in their trade media.
The next step, is to get in touch with the franchisor and ask some questions!
3. Before you pick up the phone, or send an email, it worth having a think about what Franchisors look for in a prospective franchisee.
Oddly, there seems to be a prevailing public misconception that becoming a franchisee is a simple matter of picking the model you want and then paying for it. Franchisors are (and absolutely should be) very selective when it comes to choosing who does and doesn’t get to join their network; the future success of the brand depends upon it. Here are some things that Franchisors will be thinking about:
Firstly, they have to believe you are going to be suited to self-employment. It’s not for everyone. If you are used to a steady salary every month, paid holidays, an expense account and sick pay, the realities of self-employment can come as quite a shock!
Do you have the support of those closest to you? Potential franchisees are often puzzled that franchisors involve spouses and partners in the early stages of selection, but it is incredibly important that your family is 100% behind you. When you are building your own business it’s almost impossible to simply leave it behind you at 5.30pm and head home without thinking about it again until 9am the next day. Long hours are pretty much mandatory, working weekends is common, forgoing family holidays and new cars is the norm until you have firmly established your business and made it profitable. Don’t get me wrong, the hard work and sacrifice should be well worth it in the end, but let’s just say an understanding partner is invaluable if not essential!
Can you follow a system? The secret to franchising is that the franchisor has developed a set of systems and procedures, which if followed properly should make the enterprise successful and profitable. There is little room therefore for the true entrepreneur who will inevitably want to go off on their own direction, changing the model and ignoring procedures. This is not to say that franchisors are looking for robots; but following the system and respecting the brand are non-negotiable.
Can you sell? There’s really no escaping this one when you have your own business. Sales runs through the heart of any business – you need it to find and keep new customers, borrow money from the bank, outsmart your competitors, hire the best staff, negotiate with suppliers or property agents –the list goes on. Your franchisor will help you get better at selling, and practice as they say makes perfect, but a prospective franchisee who is terrified of sales is unlikely to make it passed the first interview.
Do you have sufficient funds? Banks like good franchise models, and when presented with a great business plan from a strong candidate hoping to buy a franchise they know and understand, they have been known to lend up to 70% of the total set up and purchase costs. Even with that kind of lending support, you will still need some degree of liquid capital and it’s vital that franchisor and franchisee go into the venture knowing that the money is there to support the business until it is profitable.
Lastly, the franchisor will need to be satisfied that they can work with you on a personal level and that you will integrate well into the existing network. Conflict is to be avoided at all costs in franchising as there is rarely a winner and the time wasted on it is never repaid. Equally and for the same reasons, you need to consider how you will work with the franchisor – you don’t need to be new best mates, but you should be on the same page ethically. If it doesn’t feel right at the beginning, then best advice is to walk away.
4. If your first chat goes well you will probably be asked to a Discovery Day. These can take very different formats depending on the brand. Some will be hyper organised, take a full day and may well have quite a few attendees. Others, may be a lot less formal and could be based around a one to one coffee with the franchisor. Use the time wisely though and remember first impressions count. You won’t know if this is the right franchise for you at this stage, but if you don’t show a reasonable level of enthusiasm for it, you’re unlikely to be asked back – be excited for the opportunity to meet them and have plenty of questions prepared.
The next after this is often to meet with a franchisee. Speaking to existing franchisees is vital and any ethical franchisor should be happy to facilitate this – if not ask yourself why. A franchisor should be willing to let you choose who to speak to, not someone who has been “cherry picked” to give a positive story. No franchise system is ever perfect and franchisees will have one or two gripes to tell you about, but on balance the positives should far outweigh any negatives. If anything really sticks out as a problem, discuss it with the franchisor.
5. Once you get to the stage of being invited to apply for the franchise you really want, it’s time to crunch the numbers before signing the franchise agreement. Get your financial advisor or accountant to go over any financial projections you’ve been supplied with, with a fine tooth comb. Even with the best franchises it can take some time to set up the business and start to generate revenues so be realistic in terms of how much money you will need in the early stages to meet your business and personal needs. Franchisees have been known to fail in the early years not because of lack of customers, but from poor cashflow. Make sure you have sufficient working capital and contingency funds to see you through the peaks and troughs. The time to think about this is when you are borrowing funds to purchase the franchise. Banks will often lend between 50% – 70% of the franchise fee and the working capital requirement so make sure you get your borrowing requirements right first time – you don’t want to be going back cap in hand six months later.
The banks will look for a well presented business plan before they hand over any money. Make sure you’ve done your homework on everything from the long-term viability of the product or service you’ll be selling (a passing fad may well have passed before you pay your loan back) and the local demand for it. They will also want you to demonstrate not just that the business model works, but how and why you are the right person to make it work in your territory – what makes you the perfect franchisee? To get to this point, you’ll be glad you prepared properly from all the way back when you first sat down and made your list!
Good luck! And if in doubt, ask someone at the BFA– they know what they’re talking about!
