What makes the best franchise?
Someone asked my advice the other day about whether or not to buy a certain franchise. I hope he looked into it carefully...
So if you’re in the market for a franchise, what should you be looking out for? What are the essential elements that make a good franchise opportunity? Well, there is a lot to consider and if you ask me, professional advice before you part with your money will be well worth the it. But in the meantime – here are a few general factors to consider when you’re franchise shopping:
Check out what existing franchisees think of the business and the relationship with the franchisor. If the franchise is worth considering at all, then most of the franchisees will be happy, making money and keen to recommend the business. Ask them about the training they’ve received as well as the marketing programmes and general support they can expect. A solid franchise company will encourage you to talk to existing franchisees – if they don’t – you have to wonder why...
You can tell a lot about a franchise company by the way they respond to your initial enquiry and how they follow up with information. Are they prompt in giving information and helpful in answering your questions? Problems at this early stage don’t instil confidence for the future – see it as a warning sign.
Also, check whether there have been any problems with litigation for a franchise company and how they deal with it. Too many problems in this area could spell trouble for you.
Check the finances
Check whether the company is reliable from a financial point of view – are they likely to still be in business in ten years time? Also check very carefully the financial projections and forecasts they give you for a new franchise – are they sensible and achievable? Get advice from an accountant and don’t be swayed by promises of high earnings. You have a lot at stake.
Also look at any packages of financial assistance the company offers. Most franchises will need some sort of financial help to get started in the form of capital investment and cash flow. Very few franchise companies actually provide financial assistance directly but a reputable company will be able to point you in the right direction, provide business plans and may have a good relationship with a bank which may help you get the funding you need.
Many franchises require a particular style of premises or a new build based on the specifications of the franchise company. Check how much help you receive in finding a suitable location, purchasing property or land, getting planning permission, designing the layout and supervising contractors. If you don’t have experience in this, it can be a bit daunting, so some help might be an absolute requirement for you.
If you were to go ahead with purchasing a franchise, look at how much initial training you’d need to run the business and whether the franchise company’s training programme is adequate. Do they cover all aspects of the business operation or will you need additional training from outside (at extra cost) to enable you to run the business effectively.
If you are sent on your way with the bare minimum of initial operational training, not only are you badly prepared to get your business off to a good start but it is an indication that the franchise company won’t provide great ongoing training and support when you need it, both in the early stages of setting up, but later on when you want to expand.
Look at the ongoing support and general training you’ll receive in other aspects of running a business, such as bookkeeping, employing people etc. – you’ll probably be paying a good deal of money for a decent franchise – make sure you get your money’s worth...
As part of the franchise package, you should expect to have regular marketing programmes for the benefit of all franchisees. This is usually on a nationwide scale, such as national TV and newspaper advertising and is important in promoting the name of the franchise chain and maintaining a good customer base.
Marketing and advertising costs can seriously eat into your profits and if you have to struggle to reach your customers because of a lack of central marketing, then there’s not much point in buying a franchise – you may as well start your business independently from scratch.
It’s a big commitment to start a business of any sort, but especially so with a franchise because they are generally more expensive – you are paying for an established brand – and the legal get-out is far more complicated. Make sure you look into all aspects very carefully before you sign on the dotted line...
Hope this helps...