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things to do before buying a franchise
Buying a franchise means that you start a business with a proven and successful business model that has been tried and tested for years. Thus, owning a franchise carries far less risk than starting a business from the ground up.
Despite this, research should be conducted to ensure the franchise you are buying is a right fit for your abilities and circumstances.
1. Franchise Information Pack
Most franchises provide documents containing information on how the franchise works, the benefits of their model and how much a franchise would cost. With this information you should be able to review what is being offered. We recommend that you check that everything inside the pack is correct, by contacting the franchisor or by conducting your own research.
2. Conducting Research
Once you have digested the information inside the franchise pack, it’s time to delve further in and carry out research into buying a franchise. You could create a checklist with the following questions:
- Checking testimonials on the web from current franchisees.
- If the franchise is a member of the British Franchise Association.
- The level of competition in the marketplace for the services or products that will be offered, both at franchise level and customer level.
- Ensure you have the following information from the franchise:
- How long have they been trading for?
- How many franchises have they got?
- Do they have a European or International franchise network?
- How do they differ from other franchisors within the industry?
- What initial training and on-going development do they provide as part of the franchise fee?
- Do they provide support to industry best practises for sales and customer service?
- What other charges are there outside of the franchise fee?
- What is included within their marketing support.
3. ROI On Your Investment
The ultimate question is whether buying a franchise will be worthwhile financially. For this, you need to know the costs, franchisee average income figures and projections on what you can achieve. Once you have the initial franchise fees and ongoing costs, such as royalties that will be incurred after purchasing, you can forecast your monthly gross margin to see if this is inline with what you are looking to achieve.
This is a simple way of determining what you are more than likely able to achieve, whilst providing some thought around how you could exceed these figures with your experience or knowledge.
Be open with the franchisor on these figures, they’ll soon let you know if you have forgotten about something or why your figures may be unrealistic. A BFA franchise will give you a truthful and realistic answer every time. As an experienced full member ourselves, one of the values a franchisor must demonstrate is that they provide accurate figures and are ethical throughout their recruitment.
4. Visiting the Franchise HQ
Make sure to visit the franchisors headquarters, as this will give you the opportunity to see their internal operations and potentially ask questions to their employees. This allows you to get a real feel for how the company operates, whether the employees are as driven as the franchisor and if they appear to be the dynamic and fast moving franchise that they claim to be.
Some of the bigger and more established franchisors may offer you the chance to attend a sales conference, where you can meet franchisees face to face and get direct feedback from them.
5. The Franchise Agreement
Don’t transfer any money in the form of fees or deposits until you have sought legal advice. Try and find a specialist franchise lawyer who can scrutinise the agreement and give you unbiased guidance.
Buying a franchise is a decision that should not be taken in haste. Take time to conduct research, by looking into the franchise and their business model. Be clear and honest whether buying a franchise will financially be a worthwhile effort. Find a lawyer to take a second-look at the agreement offered, and when you have gathered all possible information and sought available advice, make the decision that’s right for you.