If you are an aspiring entrepreneur but don’t want to start a new business from the ground up, purchasing a franchise can be an excellent alternative.
Starting a franchise means you’ve got a read-made business model that has already been proven to work on every level. And, the franchisor is there to provide you with all the guidance you need, with strategies in place for branding, employee training, pricing and more so that you don’t have to go through the trial-and-error phases of finding out what works like most startup entrepreneurs.
The market has already tested out which product ideas work and which don’t. With all these benefits, it’s no surprise that the idea of taking on a franchise is popular. But, being successful with a franchise isn’t as simple as finding a business that you like and paying the fee.
Contrary to popular belief, it’s not a ‘business in a box’; you need to work at making it work. So, if you’re thinking of investing in a franchise UK, how can you ensure that it’s the right option for you and that you are ready for it?
Consider if you are the right fit
There are plenty of franchise opportunities to choose from, but are you the right person to be running one?
There’s a reason why army veterans tend to be some of the most successful franchisees; they are used to operating within a highly regulated system and following strict rules and guidelines. If you’re more creative and prefer to experiment, you might not be cut out for running a franchise since it does not give you the freedom and flexibility you would have in your own business.
Research the field
Spend some time looking into the franchise industry to arm yourself with the publicly available information on the ins and outs of franchising. The more you know, the fewer surprises there will be when you finally choose the right option for you out of the many franchises for sale. For example, did you know that many franchisees are required to spend a set amount each month or year on marketing but have no control over how their money is spent?
Determine your strengths and weaknesses
Before you choose the right franchise for you, consider your strengths and weaknesses, whether that’s from assessing your performance in your current career and past job roles or from running an existing business. Are you good at cold calling? Business to business marketing? Customer services?
It’s worth speaking to friends, family members, and even your current and past employers and colleagues to help you evaluate if your strengths are a good match for the type of business you are considering. If sales are a vital part of the business and you hate selling, it probably isn’t the right option.
Experience is also crucial; how much do you know about food service if you’re thinking about investing in a McDonald’s franchise?
The franchise fee and cost of equipment required to get your franchise business up and running is usually the bare minimum requirement, so it’s essential to look beyond this when it comes to determining the franchise that you can afford to invest in.
Getting your franchise off the ground can often involve significant marketing spend. In the early stages, it’s not uncommon for franchisees to need to survive while breaking even or even making a loss before the business breaks even.
Even if you start a franchise with a popular brand, your customers will still have to find your new location. Ensure that you have access to working capital that will cover your expenditure for this period, along with enough cash to cover your cost of living.
Talk to franchisees
A good franchisor will be happy to provide you with the contact details of current franchisees; if they are reluctant to put you in touch with existing franchisees, this is a red flag to be aware of.
Try to get in touch with at least ten different franchisees and ask them a range of questions to help you get a better understanding of how the business works and what to expect if you invest in a franchise with this company.
Some questions to ask include:
- What are the pros and cons?
- Are there any hidden costs?
- What did you learn from becoming a franchisee that you hadn’t learned from researching beforehand?
- How much did you budget for your franchise, and how much did you end up spending?
How long did it take for you to turn a profit?
- What was the most challenging part of building the business?
What is the hiring process like?
- How supportive is the franchisor?
- Would you recommend this franchise to a friend or family member wanting to get into the business?
Consider getting real-world experience
Working in a franchise store is one of the best ways to see exactly how the business works from the inside, and it can be an ideal way to help you determine whether or not your personality is a good fit for the company culture.
Some franchisors, such as Domino’s, tend to favour franchise applicants who have worked their way up from the bottom, while others will only grant franchises to people who have worked for the chain for at least a few years. Spending at least six months as a worker is a great way to gain some business experience before becoming a franchisee. This inside experience will make it easier for you to make the right decision regarding the business you decide to buy.
Hire professional help
If you have accounting skills and feel comfortable reading a balance sheet, have negotiated legal contracts and insured business in the past, then you might not need to hire a professional. However, it’s a good idea to have a solicitor and accountant assess the health of your business before you sign a contract.
A good accountant will help you assess whether the numbers add up before handing over any money for the franchise fee.
Do a cost/benefit analysis
Finally, once you’ve done all the research, spoken to some franchisees and gotten professional advice, old-fashioned pros and cons lists can be a significant final step in helping you determine whether a franchise is the best option for you and which franchisor to opt for.
Write down the benefits that you’ll be getting, such as an established brand, franchisor support, national marketing, and store design, and on the other side of the paper, write down the costs and liabilities such as your franchise fee, costs for marketing, and any equipment, inventory or merchandise you’ll be required to buy.
Buying a franchise can be an excellent option for anybody wanting to start their own business, with many advantages over starting from scratch. But, there’s still a lot of work that goes into being successful, so make sure that you have considered these important factors before you invest.