When looking to buy a franchise, one of the most common questions we get asked is "what is the best franchise in the UK?" We've mislead you slightly with the title of this step as there is no such answer! It is probably the same as asking: ‘what’s the best car to buy?’ There are so many points to consider, for instance: How much do you want spend? What type of roads will you be driving on? How many passengers will you take? Do you want a new car or a used one? Does the insurance premium matter?
Like when buying a car, there are many questions to answer before you can reach a shortlist of franchises to buy. The best franchise for you may not be the best franchise business for someone else.
In Step 3 we therefore look at how to choose the best franchise for you, including how to make sure you share the same values as the franchisor and how to identify a good franchise and avoid bad franchises. We also look at why franchises can fail and mistakes to avoid when buying a franchise. The British Franchise Association also gives advice on why choose a bfa franchise.
Finding the right franchise for you
In order to find which franchise is best for you, you must assess your own skills and experiences. Once you have found the type of work that suits you best you can then select the franchise type that suits you.
Answering the questions below will help you to develop a better idea of what you want to do and will also assist you in narrowing down the options available to you.
What do you enjoy doing?
Remember it is so very important that you choose the type of franchise that allows you to do the type of work that you like and are good at for two important reasons. Firstly if you like what you do and are good at it, you will be more likely to succeed and secondly, buying a franchise is not something that you can step out of lightly. You need to consider working at the franchise at least for the next five years so it is important that you are happy doing the work involved.
- Talking on the phone
- Motivating people
- Working with your hands
- Direct selling
- Talking face-to-face with customers
- Managing people
- Working with children
- Working with animals
- Numbers, accountancy
Where do you want to work?
You need to ask yourself what type of environment you wish to work in:
- Do you want to work in a shop?
- Do you want to work in an office?
- Do you want to work from home?
- Do you want to be mobile and travel to customers?
What type of experience do you have?
Identify the skills you have developed over the years in order to ensure the franchise you chose fits your skills and experiences.
- Have you managed staff? Many franchisees are geared to a franchise employing many staff with managed skills.
- Have you been involved in administration? Many franchise systems involve extensive administration work therefore it would be beneficial to have some experience in this area.
- Would you be comfortable in a role that focuses on making sales?
- Are there any particular franchise industries that interest you?
- How many hours and which hours do you want to work e.g. daytime, weekends, flexible?
- Do you prefer to work by yourself or in a team?
- How much money do you want to invest?
- How far are you willing to travel to work each day?
When you are awarded a franchise, you are committing yourself to operating the business for at least five years. If you don’t enjoy the work, it will be a lot more challenging.
Our advice is to find a franchise that you will enjoy working at and suits your personality and interests. For example, if you are an introvert and hate selling, don’t consider a sales orientated franchise. However, always remember that business does not happen until a sale is made, so if you don’t want to sell, maybe you are not cut out for business. The key thing is to be realistic and aim for something you will enjoy.
Finding a franchisor who shares your values
In this article, David Spackman, Director of Franchising at Newton Fallowell, outlines what you should look out for in a good franchisor, and how can you protect your interests as you conduct your search.
Look for a credible franchise
The BFA is a good place to start, as any franchisee that’s listed will have had to open themselves up for assessment to get the BFA kite mark.
But look as widely as you can; search for customer reviews about the brand, see if the internet throws up any history that puts a different complexion on the company and, if you can, speak to the competition and see what they say.
Visit franchises in person
Once you’ve assessed the candidates and drawn up your shortlist, then it’s essential to eyeball those franchises.
Do not consider going with someone you haven’t actually visited. In these days of virtual services, a telephone line and office address is no guarantee of substance. You need to see the bricks and mortar of your franchisor and sit across the table from the people you will be dealing with.
Choose a territory that works for you
And don’t be tempted to be selective simply on the grounds of it suiting your geography, either in terms of the territory available, or for making initial assessment visits.
When it comes to choosing a territory, make sure you’re not being foisted off with a territory that suits the franchisor, but doesn’t suit you. Does it support your family and lifestyle choices, and, most importantly, does it have the potential you’re looking for.
You should always thoroughly research the territory, including a comprehensive assessment of your competitors, using mystery shopping where possible. But you should expect your franchisor to be helping you with this, as they have been involved in the same process many times before. It should be just as important to them as to how strong the territory is, as your success also feeds their future growth.
Talk to existing franchise owners
It’s vital to get out and talk to existing franchisees on the ground. Ask them questions, see how they operate, and see how they reflect the brand values as you perceive them.
Joining a franchise means you are joining a family that’s made up of all those other franchisees, as well as your franchisor.
Be very nervous of a franchisor who does not offer to set up meetings for you with existing franchisees, or tries to engineer such meetings.
There will always be good and bad feedback, but you should be encouraged to speak with them and find out all their experiences, warts and all.
Check out the finances
Then get out that toothcomb to go through the budget figures and cash flow forecasts that the franchisor has given you.
Challenge the basis of their assumptions and ask difficult questions. If they say “you can expect to sell X units per month”, ask if you can expect to make that from the outset, or is it more likely to be two years down the line, and how many of their existing franchisees sell that many.
Knowing what the ‘average’ is can be deceptive, not because the figure is anything other than entirely accurate, but because it’s made up of lots of highs and lots of lows.
Get a franchisor's point of view
My decision on whether to take on a new franchisee will also be affected by their financial position and how much they need to raise.
If they are intending to re-mortgage their home to raise the franchisee fee and working capital for the first year, then I want to be sure they have the ability to generate the return they need.
See how the franchisor advises you on the funding of your franchise. If you need finance, do they refer you to their contacts in the specialist franchise division of the bank, or do they leave you to struggle at local branch level.
If you have the ready cash, or can raise it personally, do they offer advice on weighing this up against other options, such as business loans where costs can be offset against business profits?
In the same vein, be wary of a franchisor who does not help you work out how much it will really cost you to set up and get the business running, as different territories and different funding requirements can have a major impact on start-up costs.
Ensure you will receive support
And finally, ask how the franchisor will be supporting you in future and how you can share knowledge and benefit from the experience of other franchisees.
Is there an annual conference or regular get-togethers, is there an online forum? What marketing support will be available and what financial expertise is there for you? Answers to questions like this will show how much they’re investing in helping you succeed into the future.
Finding the right chemistry in a franchise partnership
In this article, David Spackman, Director of Franchising atNewton Fallowell, discusses how, as a potential franchisee, you need to make a match with the right franchisor... rather like trying to find your perfect romantic partner.
There must be shared interests, shared values, shared aspirations and a strong desire and determination to make it work, even through the bad times. And there’s got to be honesty and integrity at the heart of the relationship, with shared expectations as to how the other will behave.
And just like looking for love, if you go into it with stars in your eyes, determined to see only the good things, then you’re likely to be disappointed.
As franchising director, it’s my job to meet and talk to all our would-be franchisees, and contrary to what many imagine, I don’t have a contract ready for anyone who can raise the money, and often have to say “I’m sorry, but I don’t think we’ll make a good match…”
So why would I turn away the potential investment and how can you take the initiative in finding the right match to make your franchise dreams come true?
First and foremost, you should view a prospective franchisor in the same way as any potential business partner. And certainly, that’s the way they should be viewing you.
You are buying into a franchise because you want a business-in-a-box opportunity, with set systems, set processes and a proven track record. And so it doesn’t make sense to buy the box and then say goodbye to the franchisor, as the real value lies in how you grow the relationship between the two of you.
If you are fully committed and follow the systems, adding your personality and flair, and the franchisor acts in true partnership with you, they will give you more added value through the association than you will ever pay them.
Ask the franchisor how they will work with you, both now and in the future, to help you make a success of the business
Look honestly at your skillset before choosing your franchise opportunity. Do a SWOT on yourself and see how each franchise model matches up.
Recognise that it’s not enough to have a personal interest in a topic, you need the skills to sell and grow a business in that sector.
Too often, people tell me they are interested in our property franchise because they like interior decorating or enjoy watching Kirsty and Phil on Location-Location. Honestly, that’s not enough, nor even a starting point. What counts in property is a killer instinct and nerves of steel, and ideally a background in the sector, or in sales.
Ask your franchisor to describe a successful franchisee for their brand, and when you speak with their existing franchisees ask about their background and what skills were most valuable in starting out.
Having done that skills analysis, it may become obvious that you will need a lot of support to fulfil your potential – perhaps you have no experience in the sector, or are lacking in the vital sales skills.
If you look to join a very early stage franchisor, you may be accepted because the brand is hungry for growth, but then find yourself left to stand or fall on your own.
Similarly, at the other end of the spectrum, there may be a huge franchisor who adopts an attitude of some will, some won’t to franchisee success. In between those extremes, you’ll find many franchisors who will honestly tell you whether or not they can help you build on your skills to achieve results.
Ask yourself, where will I struggle and then ask your franchisor, how will you help me overcome these problems?
If you’re looking for a lifestyle business, or a part-time commitment, then it’s asking for trouble to go into partnership with a franchisor who is looking for go-getters who are thinking about their business 24-7 and responding to their customers 365 days a year.
Equally, it’s no good picking a franchise that is specifically intended for lifestyle when you’re needing to earn a substantial, full-time income.
Ask your franchisor, what sort of commitment do you expect of me in this business, what’s the average that other franchisees are working?
So, before you leap into bed with that franchisor, think about how well you fit with each other; ask the questions and weigh up the answers. Good matches are what help franchisee start-ups to demonstrate strong success rates. So, making the decision is a really big deal, but the biggest risk is not taking the risk at all.
Key considerations when choosing your franchise
In this article, Edward Mauleverer, of Ed’s Garden Maintenance, has the following to say regarding important things to consider when choosing which the right franchise for you.
“The Franchise business has really taken off in the UK in recent years and there is a vast range of franchise offers available. Joining a franchise is not a decision that should be taken lightly - people invest considerable sums of money and enter contracts that are typically around five years’ duration.
It is very important that investors approach their decision-making in a thorough way – they are much more likely to be happy and successful in the long run.
There is clearly a whole range of things to consider when buying a franchise. However, the following considerations are of critical importance and should always be taken into account when making such an important decision about your future:-
Remember the service that’s at the core of the business
Don’t be seduced purely by the earnings potential. Clearly, the financials are important but equally as important is the fact that you will be delivering the service of the business you are investing in day in day out and it is very likely that you will be more successful doing something you enjoy. Many of our franchisees come to us because they either love gardening or a healthy outdoors lifestyle and they rarely change their views on this. Don’t make the mistake of signing up for something that you won’t enjoy .
Do your homework and shop around
Don’t make the mistake of thinking that all franchises are the same. They are all very different - from their fee structure right through to the culture of the specific business. Make sure you take enough time to understand all of this. At Ed’s we actively encourage potential franchisees to look at other franchises - we would much rather be selected for compatibility reasons than to just be the first franchise option someone stumbled on.
Take your time to find out about other franchisees in the business
Don't just find out about how much money they earn but how they feel about what they are doing, the key challenges they faced etc. Find out how many of them sign for a second term. It is true that franchisees are very busy running their own businesses and can’t be spending all their time meeting potential franchisees.
However, it is very valuable to be able to speak to established franchisees to help you to make your decision - after all, they were in your shoes not that long ago. You shouldn’t feel embarrassed to ask for this access. At Ed’s we actively encourage prospective franchisees to go out with established franchisees and they have carte blanche to ask whatever they like. This gives a great insight into what it’s all about without any ‘hard sell’ tactics. We would much rather people signed up with their eyes open wide.
Try to see beyond the marketing of a franchise and understand how supportive franchisors really are
Try to get a good feel for the quality of the initial training. A good indicator of franchisor professionalism and their long-term commitment to the success and wellbeing of the franchisee, is their commitment to ongoing support and training. At Ed’s we do continuous business coaching and also invest a lot of time and money on ongoing training. In our view it is money very well spent.
Take your time to think things over properly once you have all the information you need
We actively discourage people from signing up impulsively and always send them away to think it over. A good franchisor will want you to have made an informed sensible decision to join, having reflected properly rather than making an on the spot decision. It is also a very good idea to take a partner or friend along when you go to meet the franchisor. It is invaluable to have someone to discuss the option with afterwards.
Take professional advice
Always get a legal professional to go through the contract before signing anything. Remember that the devil can be in the detail.
Finally, trust your gut instinct
If something niggles and tells you that a particular option isn’t right for you, then it probably isn’t. The same applies to when an option feels right – however even then, make sure you back your gut feeling up with solid research and side by side comparison!”
Why choose a bfa franchise?
Starting a franchise business is not a decision to be taken lightly. It requires a serious investment of time, emotion and, potentially, capital. If you’ve ever read or heard advice from somebody qualified to give it, they’ll rightly tell you it’s something you should take your time with and research carefully.
Part of that research should involve a brand’s British Franchise Association membership status. The bfa is the body that protects and promotes good franchising practice in the UK and is recognised nationally and internationally for its ethics, standards and credibility.
So what does that status mean to you as a prospective franchisee, and why should you consider membership to be a powerful indicator and one you should actively seek?
Not all franchises are equal
First, it’s important to note that membership of the bfa is not achieved simply by paying a subscription fee. The bfa is strictly based on standards of good franchising, and has been since its formation in 1977. If a franchisor can’t meet those standards, then it cannot join: each year, companies have applications refused.
Membership is only granted following an in-depth examination of the franchise model and the business’s proven performance.
Among many other aspects, the accreditation team looks at the company’s franchise agreement, its marketing collateral, accounts history and, where appropriate, it asks existing franchisees for confidential feedback on their experience in the network.
The banks involved in franchising all respect the standards represented by the bfa. They understand the accreditation process and the quality needed to gain and retain it, and therefore look more favourably on funding applications from franchisees of those brands.
Help in your research
As well as supplying the information that’s required to pass accreditation, bfa member franchisors adhere to the guidelines in the Code of Ethics and the Rules of Membership, which enshrine the principles of best practice in franchising. For you, that means the projections you’re given on the level of turnover and profit you can achieve as a franchisee should be based on historically achieved numbers – either by another franchisee or a company-owned outlet – with proof available.
It also means you should be given the chance to speak with franchisees already trading in the brand, a crucial part of your research into the business.
Planning ahead: it’s good for your business
A couple of points that are easily overlooked come later down the line in your franchise journey, but are worth bearing in mind from the outset.
When it’s time to renew your franchise agreement, bfa rules state that any renewal fees should not be a profit-making opportunity for the franchisor – rather, they should simply cover any associated administrative costs.
Second, when the time is right for you to sell the business, being part of a member franchise can help you maximise its value, because a credible brand is worth more to a buyer.
Franchisees can join – and their voice is heard
Franchisees of bfa members can join the Association themselves for £10 per month, accessing a host of business and personal benefits that make membership cost-neutral (or better).
Legal, HR and business support combines with deals on everything from car hire to shopping to holidays.
And with that membership comes the opportunity of representation. Three franchisees sit on the bfa’s board of directors, and many more on the committees that govern its future direction. This year a franchisee will chair one of those committees.
The bfa speaks for all stakeholders in franchising, and listens to what they have to say.
Membership of the bfa is not a guarantee of franchisee success: starting any business comes with risks and becoming a successful franchisee depends on many factors, not least your own passion, the right match and your work ethic. Your due diligence is critical before signing any contract.
What membership does show is a franchisor that says: “We’re proud of our franchise model and how we support our franchisees and have chosen to put it up against the toughest industry standards to affirm that.” And one that has been vetted by a third party.
Isn’t that the kind of franchise worthy of your time and effort?
The bfa holds an up-to-the-minute list of all members on its website – make sure you check there if a brand is claiming membership.
Mistakes to avoid when buying a franchise
In this article, Papa John's Business Development Manager looks at the mistakes to avoid when choosing a franchise business opportunity.
Don’t pick and industry you are not interested in or inspired by! Motivation is a key component of doing well in business and so selecting a sector which you think you will enjoy and you are keen to work in will contribute to your long term success.
A big idea
Don’t get drawn into an exciting yet unrealistic idea. If its sounds too good to be true it probably is! Look for an established franchise brand with a proven business format and many successful franchisees who come from all walks of life. If they can succeed then you are more likely to be able to make a good living too.
Don’t select a franchise which doesn’t match your skills. You may not need to be experienced in the particular industry sector, as full training will be provided, but if you know the franchise needs sales skills and you are good at admin then this may not be a great match-up.
Be honest about what you are good at and also about your shortcomings (we all have them!) and this can help you find the right opportunity.
Knowledge is king. You must know what you are getting into when buying a franchise! However, simply believing what you are told by a franchisor trying to sell you a business idea is not enough. Talk to franchisees and spend time working with them to find out what it’s really like on a day to day basis.
Research the franchise opportunity fully. If you have any doubts in your mind, you have not completed sufficient research!
Facts and figures
Avoid assuming that estimated income will be actual income. Expect to see the accounts of a similar sized franchise and go through these facts and figures with an independent accountant to make a realistic assessment of likely earnings.
You may require a business loan to purchase the franchise and being able to set out a realistic forecast based on real income and expenditure figures as part of a business plan will help secure funding and budget for the future too.
At Papa John’s we like to see franchisees run a sensitivity analysis on the financials, other words a best, average and worst case scenario so they fully understand their position.
Don’t ignore professional advice from franchise consultants, solicitors and accountants. For example you must get your franchise agreement checked by a franchise solicitor so you know what you are signing up to.
Running any franchise, like any business is hard work. Don’t assume you will succeed without putting in the hours. However, you will be directly rewarded for your efforts running your own business.
Just because you are joining a franchise, this is no guarantee your business will be successful. Training, infrastructure, support and product will normally be provided but at the end of the day the buck stops with you. However, don’t be afraid to ask your franchisor for help if you need it.
Joining a franchise which is a member of the BFA means the franchisor is bound by a code of ethics created to protect the interests of franchisees. While it is not a guarantee of business success, it does ensure that the franchisor has been independently measured using established membership criteria. This is not the case with non BFA member franchises, so proceed at your peril!
Why a franchise can fail
Despite franchising being a safer way of doing business, it does not mean that it is risk free. Many franchises have failed in the past and many will do so in the future.
There are many reasons why this can happen and so it is vital that you undertake as much research as possible when looking to buy a franchise business in order to find the right franchise for you and to help you spot a bad franchise from a good franchise.
Below are some of the reasons why franchises can fail:
Lack off/no systems in the business
Franchising is all about systems; being able to replicate systems is what makes a business franchiseable. An ethical franchise has everything documented and systemized so that it can easily be passed on to others to copy.
If a business has no systems and instead relies solely on the skills of the individuals within the business, then it should not be franchised. Some businesses however will ignore this and start to franchise their business anyway. These companies are usually only interested in making money fast. Once they sell the franchise to someone who doesn’t have the required skills, then it fails as there is no systems for the franchisee to follow.
A good franchise can usually take someone with no skills or experience in their business and train them to run a successful business by following their systems.
No track record
A business can only be franchised if it has a track record. We are amazed at the amount of people who tell us that they have an idea for a franchise but don’t actually have a business! The business comes first; it is not conceived at the same time as the franchise.
Those usually wishing to start a franchise without having a business are people who are looking to make money fast and think franchising can help them do that. Unfortunately sometimes these people convince others that it is a franchise resulting in them buying into it. This is why it is important that you know all there is to know about franchising and how to spot a bad franchise from a good franchise.
Make sure that the franchisor has an established track record of running a business foremost and then their track record in franchising. They may be new to franchising but if they have been running a successful business then there is no reason why they can’t also run a successful franchise if their business is franchiseable.
Location, location, location
This saying is not just associated with buying a house, but it is also essential when buying a franchise. Half the battle of a successful franchise is finding the right location for your business.
Not all franchisees need to be in a city center location or in a shopping mall, it depends on the nature of your business, but if you wanting to buy a food franchise that relies on footfall then you need to find a prime location for it.
A good franchisor will spend time finding the right location for you.
Lack of marketing
Good franchisors will spend money on promoting the brand nationally as well as locally.
Smaller and newer franchises with less brand awareness will require additional marketing and so the franchisor should have a detailed marketing plan in place. Ask the franchisor about their marketing activities and what they do to gain recognition and awareness.
If the franchisor does not have a marketing plan then this could be worrying as how else will they create awareness to the brand.
One of the advantages of marketing by the franchisor is that the franchisees benefit from the joint activities, without marketing then they just become like independents. A good franchisor will contribute some of the money they get from selling a franchise to a marketing fund to be used on local as well as national marketing.
A franchisor that is just out to make money and not concerned about the business long-term will not be willing to put money towards marketing.
Check out what the competition is for the franchise in your local market. If there is no competition then there may not be a demand for the product, resulting in it not having much future market potential.
Look into why there is no direct competition. Also check if the franchise is operating in any areas with similar demographics to your own, if so, is it successful?
If there is a lot of competition then you may have a problem gaining a share of the market. You have to look at if the franchise has any USPs that gives it a competitive advantage.
If your product/service is inferior to what you competitors are offering then you may struggle in the market. Again look at markets similar to yours in which the franchise is operating to see how well it is doing.
One of the biggest reasons franchises fail is the franchisee under-estimating how much it is to buy a franchise and also run a franchise, as it is not just about having the money for the investment, but what about the costs you are going to incur when running the business? How do you pay staff salaries? How do you buy supplies?
If your franchise business is not making money initially, you need to make sure you have enough money for the day to day operating costs.
At the same time you need to also be able to pay your own bills and feed your family. Over-estimating what you need is the best way of approaching calculating how much money you will need to cover the cost to buy a franchise and run it successfully.