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
Assessing the myriad of franchise opportunities that exist in the UK (and abroad) can be a daunting and frankly exhausting prospect. With more than 900 UK opportunities available, seemingly limitless choice can actually hinder your decision-making process - We’ve all sat on the sofa on a Friday night endlessly scrolling through the thousands of Netflix offerings, only to end up watching ‘Friends’ reruns yet again.
How then do we cut through the numbers, and shrink 900+ to one? And more importantly than that, the right one?
Research into franchise opportunities has never been easier. There is a plethora of online franchise portals, franchise exhibitions, magazines, webinars, discovery days and roadshows to benefit from. The best time to start this research is right now, but its important to follow a structured process of collecting information and comparing the opportunities that may fit best for you.
This article will deal with what I call the pre-decision making process, which will take you from 900 opportunities to less than ten. Part 2 will deal with how to compare and contrast the remaining opportunities to select the right business format for you.
Step one – What can you afford to invest?
All franchise opportunities will require a financial investment at the outset known as the ‘Franchise Fee’ or ‘Initial Investment’. This can range from as little as a few thousand pounds, to many hundreds of thousands. Its important then to understand your capacity to invest, which will be made up of liquid capital (money in your bank account) and borrowings (money borrowed from a bank or financial institution). Be honest with yourself about what you have, and what you can access – it Is very important not to stretch yourself.
Remove any franchises that do not fall into your financial bracket.
Step two – What do you need to earn?
We all have ‘costs of living’ to meet, and for the majority of potential franchisees their chosen franchise business will be providing the income to support these costs. At this point, its time to build a personal expenditure document. Write down all of your outgoings, starting with the major commitments (mortgage/rent, food, childcare, utilities, vehicles etc) and slowly move down to the smaller outgoings (treats, days out, etc) – remember to include all the equivalent costs for any dependants you may have.
Now add 25%.
For a business to support your standard of living, a 25% margin allows for increases in costs, but also unexpected additions. Don’t forget there is likely to be a gap between when your new business begins to operate and when in generates suitable income. You will need ‘working capital’ for this stage, which must be allowed for in your budget.
Remove any franchises that do not provide enough income to meet your needs.
Step three – Can I do it?
This may seem obvious, but its very easy to be sucked in by a glossy brochure and large earning potential. Make sure you do your research and thoroughly understand what the day-to-day requirements of you will be. Remember, franchise agreements are binding, and you will need to operate your business for a minimum of five years – that’s a long time to be committed to a daily task list that you don’t enjoy. Being self employed as part of a network should be a freeing experience, so make sure you will love what you do every day.
Remove any franchises that you cannot see yourself doing daily.
Step four – Owner/Operator or Management?
Franchise opportunities in the UK can be largely separated into two groups – Owner/Operator or Management. Owner/Operator are ‘doing’ franchises; the franchisee is actively involved in the day to day operation of the business, often being the only employee or worker within it – good examples of these business are Café 2U, Snack in a Box, and my very own Agency Express.
Management franchises require the franchisee to build a business of employees who will be ‘doing’. The franchisee will manage the business operations, and the staffing requirements but will be less involved in the end product – good examples here are McDonalds, Tax Assist, and Dream Doors.
Whilst there are franchise businesses that can be operated in both models, most will be focussed on one or the other – if you are unsure, simply ask the franchisor ‘are most of your franchisees owner operator, or management?
Decide if you want to be ‘doing’ or ‘managing’ and remove the franchises that don’t meet your needs.
Step five – Understand your acceptable level of risk
Different franchise opportunities will equate to different levels of risk. Established franchise networks that have been trading for many years, with stacks of franchisees around the country will offer a considerably lower level of risk BUT will likely mean spending more on your initial investment to access such an established brand. New franchise businesses will offer the chance to be an ‘early adopter’, and to be part of the team that shapes and forms a new network. They are likely to require less initial investment, and to have greater availability but this comes with the inherent risk of any new business – it could fail.
Remove any franchises that do not meet your acceptable level of risk.
Step six – Availability
Now your pot of franchise opportunities has been whittled down, its time to pick up the phone and ask one simple question – ‘do you have availability in my area?’. Not all franchises are territory based, but many are and if your chosen region already houses a happy, healthy and successful franchisee you may not be able to proceed with this brand.
Don’t be tempted to stretch how far you are willing to travel to offer the service or product; either your desired area is available, or it isn’t. Do remember to ask about resale opportunities; there may not be any ‘greenfield’ (industry term for cold start area) territories, but there may be an existing franchisee looking to sell their operation.
Remove any franchises that do not have availability in your area.
By now you should have a greatly reduced number of franchise opportunities to consider. Assuming you are down to 10 or less, the final step in this stage of the process is to list them in order of preference based on the information so far. Do this in a simple spreadsheet with columns for comparison of initial investment, availability, premises required etc. This will assist with your more detailed analysis in part 2 and highlight to you any gaps in your knowledge so far.
If your list of potential opportunities is still as long as your arm, then I would recommend starting again with much tighter parameters – remember to be strict and honest with yourself; there is no value in trying make a square peg fit a round hole.
Now our list is distilled to core options that meet our needs and wants, lets move on to part 2 – compare and contrasting your chosen few.
With our list of franchise opportunities more manageable, it’s time to delve into the detail and there is only one effective way to do this; get in touch with the franchisor directly. Pick up the phone and ask to speak with the franchise recruitment representative. Don’t be nervous, franchisors are very used to speaking with franchise prospectives with differing levels of knowledge and experience. Most franchisors will be happy to give you their time, and to answer any initial questions you may have.
Request a franchise prospectus. This should provide you with an outline of the model, potential earnings and expectations. Remember, this document is meant to be enticing so make sure you are pragmatic about its contents. Take some time to also go through the website, any reviews and testimonials available, and to make note of industry awards the franchisor has won.
To validate the quality of the franchise you are interested in there are certain core elements that should be present and easy for the franchisor to demonstrate to you. Assuming then the initial call is positive, its time to meet with them, and make sure all of these key elements are in place:
Proven business history – before any concept becomes a franchise, it must be a viable business first. This may be a pilot operation intended to become a franchise, or a successful stand-alone operation. Either way, you will be replicating this business, so ensure it exists, is successful, and the franchisor can evidence this to you.
- Proven established marketplace – There is no point having a great product/service if no one wants to buy it. Make sure you have investigated the market place your franchisor is operating in, and that there is a NEED rather than a WANT for your end user offering.
- Strong reputable brand - When you begin marketing your new franchise, will anyone know who you are? Is the brand recognisable to the core customer base you will be reaching out to? If not, what efforts is your franchisor making to change this?
- Effective training – You will shortly be replicating the business model of your chosen franchisor; what training are they going to provide initially, and ongoing? Your franchisor should be able to provide a detailed description of what training you will receive, on what elements of the business and in what format. Make sure you are satisfied this will meet your requirements.
- Ongoing support – Franchising is all about being in business for yourself, but not by yourself. What ongoing support mechanisms will your chosen franchisor be offering, and how regularly will you be able to access them? Support should be extensive, easily available and cover every element of your chosen business model. Make sure to ask if any additional charges can be incurred. Ask to meet the support staff, and quiz the franchisor about who will managing your onboarding process.
- Documented systems and controls – You will shortly be replicating a business model. For this, you will need instructions, do’s and don’ts, and a clear road map to success. This is known as the Franchise Manual, which will be a large written document that is regularly updated by the franchisor. The manual should be extensive and detailed, covering even minute details of the business operation. Make sure you ask to see the manual, which any franchisor should be happy to arrange.
- Management Service Fee – Your franchisor makes money by charging a fee for the support services they provide. This is normally by way of a percentage of turnover and should be clearly defined within the franchise agreement. Make sure you understand what this fee is and how it is calculated. It should be clearly indicated in any cashflow projections provided as well as any other additional costs you may experience from the Franchisor.
- Bfa Membership – Franchising in the UK is self-regulating. It is important therefore any franchisor you are considering can evidence they are a British Franchise Association member and meet the required code of ethics. This is a kitemark ensuring franchisees are treated fairly and ethically – any franchisor not a member should answer one simple question – why not?
- Security of tenure – your franchise agreement will have a term – usually 5 or 10 years – and during this term, you should be offered ‘security of tenure’. This means the franchisor cannot change your agreement terms, or remove you from the network without due cause. Termination details should be clearly outlined within the agreement, should be fair and reasonable, and inline with the Bfa ‘Code of Ethics’. Make sure your chosen franchisor can outline what securities they can provide and ask what (if any) examples of forced termination they have experienced.
- Method for resale – a core element of franchise ownership is the ability to resell the business in the future. Your franchisor should have a clearly defined process for franchisees wishing to exit the network, along with examples of successful franchise resale exits. Make sure you understand any costs involved in the resale process, and any restrictions you may experience after (known as restrictive covenants). The asset that you will build is core to the value your franchisor can provide – make sure you don’t forget this often-overlooked step.
- USPs – USP stands for Unique Selling Point - What separates this franchisor from others? Why would the end user choose this business over any other? It is important you are investing into a brand that offers a unique and enticing proposition for their customers. The franchisor should be able to explain their USPs and how they market them.
- Access to funding – Most franchisees will require finance to support the launch of their new business. Good franchisors will already have established relationships with major finance lenders, and should be able to explain the application process to you. Once your decision is made they will be happy to review your business plan finance application before its formal submission. Any franchisor unable to access finance terms should be avoided.
Whilst this list is not exhaustive, it covers the most important parts of any franchise business. Any franchisor worth investing in should tick all of these boxes and be able to demonstrate the application within their business. Your head may well be spinning after this meeting, so make sure you take notes, and refer back to them throughout the due diligence process.
The franchisor will now provide you with an additional pack of information. This should include a copy of the franchise agreement, cash flow projections, details of training and the next steps you will need to follow to become a franchisee.
Seeking external advice
By now you will most likely have a favourite. Its time then to seek external advice to ensure you are making a balanced decision.
Franchise Solicitor – I would always recommend asking a solicitor to review the franchise agreement you are about to enter into. They will provide impartial advice, highlighting any clauses that may be overly restrictive or weighted to the franchisor. The fee for this service is usually between £750 and £1000. There is a helpful list available on the Bfa website.
Accountant – Especially important if you are considering a resale business. An accountant will be able to objectively question the numbers, and provide guidance on when you will break even and become profitable. Fees will vary, but should not be prohibitive.
Spouse/Family – If your spouse isn’t onboard, your core support network is comprised. They should be your biggest cheerleader, able to offer comfort and support on the tougher days. Running a business is challenging even for the best franchisees, and its important the spouse of the franchisee is as invested personally in the business success.
Other franchisees – The franchisor should encourage you to speak to other franchisees within the network. Speak with a minimum of three and listen to their experiences. Does this match with what the franchisor has told you? The most important question to ask is simple; ‘Given what you know now, would you do it again’?
At this stage, you should have all the information you need to make an informed decision about your franchisor.
Remember, you should only proceed if you are 100% sure that all of your questions have been answered and the business meets your needs and wants – if you aren’t at 100%, then go back to the franchisor and ask for further clarity. There should be no pressure from the franchisor at any stage, and you should feel in control, excited and driven to succeed by the time the ink finds the page of the franchise agreement.
Finally, remember franchising works! Many thousands of franchisees have gone before you with hundreds of franchisors and have realised the dream of business ownership. Best of luck in your search!
How do you select the right franchise? Use your franchise sat nav!
In my nearly 30 years in franchising, I have never heard of anyone waking in the middle of the night screaming ‘I must become a franchisee’ – it simply doesn’t happen.
Franchising is something that sneaks up on you and is usually the result of some external action, be it redundancy, lack of progress at work, taking early retirement or indeed simply because at a point in time you decided that you could do better working for yourself rather than making money for somebody else.
Making the decision to want to run your own business is one thing - finding out how is another.
Often the thought of becoming a business owner means many people rush headlong –like lemmings- into making instantaneous decisions without considering the consequences.
Over my 29 years in franchising, I have met the eager, the considered, the timid and the confident who, in the process of wanting to become franchisees, all come into franchise interviews with one desire - ‘I want a business’.
Often though, people do not have a plan and yet outside of getting married and buying your first house buying a franchise is one of the biggest and boldest decisions that you are going to make in your life – so you need a plan. You need your franchise sat nav!
You need to know where to start, who to go to for advice, how to compare different franchises and what questions to ask.
With over 900 business format franchises in the UK, how do you select the right franchise?
Well, I hope the following six step process will help you through the process.
Step 1 - Initial Assessment
A good franchise needs to have at least the following:
- A proven business history
- Documented systems
- Effective training programme
- Security of tenure
- Ongoing support structure
- Membership of the British Franchise Association (bfa)
Do some initial research online about the franchise that is of interest to you – look at their web site:
Do they come across as professional? Have they been in business for several years? Have they been able to develop a strong franchise network? Does it look like they provide a high level of support? Are they in a large and growing market?
Can you see yourself operating in this market and working with this franchisor?
This ‘top line’ research is your first filter and will help you to remove those franchises that are obviously unsuitable for you.
When you meet the franchisors, you can then spend the time delving more specifically into support, training, number of income streams, business planning and any other aspects of the franchise you want to explore.
This initial assessment (research) will enable you to narrow down the franchise field to only those that appeal – allowing you to then move seamlessly to Step 2.
Step 2 - Investment Cost
This is critical and necessarily comes very early in the process.
Warning: A franchise is not a job, it’s an investment.
However, it is an investment that needs to be carefully planned and carefully calculated.
You must not over invest – no matter how ‘appropriate’ or appealing the proposition.
No matter how exciting the business you should only invest what you can afford! Don’t get carried away by the excitement of it all and over-commit financially – trust me, if you over invest at the start, you will suffer in the future.
You need to work out exactly how much you need to invest and most importantly how much you can invest.
There is no point taking on a business that will only generate half of what you need.
Don’t over-extend yourself – be sure you can raise the requisite funding and make the repayments through the business.
It is amazing just how much money people do find squirreled away, be it in investments, shares, Individual Savings Accounts (ISAs), cash, assets including your house, car and of course, family!
Plus of course the major banks see franchising as a very safe lending option and will generally lend up to 70% of the total cost of a good and an established franchise.
In addition, there is the government-backed start-up loans scheme which the government created to encourage people to become business owners.
So, there is money available from all quarters – what you need to do is work out what your maximum investment level is going to be.
By going through Step 2 you will have removed another set of franchises - those that didn’t meet your investment level.
Step 3 - Evaluating the Market
This stage is all about asking questions – and these 10 will serve you well:
- Is the market robust? i.e. not subject to seasonality or fashion.
- Can you see the market getting stronger?
- Can demand be sustained?
- Is the market fragmented? I like fragmented markets.
- Is the industry growing or declining?
- Is there a lot of competition?
- Are the competitors aggressive or passive?
- Are there multiple income streams available?
- Can you see new business opportunities?
- Do other industries have products and services that could compete?
You are looking for markets that are large, robust and accessible.
By the end of step 3 you will have narrowed your options down to a handful of franchises that meet the criteria you are looking for, specifically proven history, good systems, effective training and bfa membership. They are businesses you think you may be interested in and have some or most of the skills required; the investment required is within your compass; and the industry meets your specification in that it’s large, growing and sustainable.
Step 4 - Comparing Franchisors
You’re now down to two or three franchises, so step four is all about evaluating the pros and cons of each.
Use the bfa, Companies House, magazines and franchise web sites to do further desk research - basic trading information and ‘cosmetic’ information about each franchise –how they promote themselves, who they are looking for and how they position their brand.
Then go armed with questions for the franchisor which specifically go to the heart of their business – market size, competition, level of repeat business, scalability, level of support and anything else that’s important to you and your own preferences.
Never attend a meeting without questions – you won’t impress the franchisor!
Ask to speak to a selection of franchisees. If the franchisor refuses, walk away - this is a huge danger signal. Good franchisors will insist you meet existing franchisees for two reasons:
- Only franchisees can really tell you about running the franchise from personal experience.
- The franchisees will feed back their impression of you to the franchisor to help the franchisor in their own decision making about your suitability.
When you meet the franchisees dig deep into their business – ask specifically about their relationship with the franchisor, the support they get, how their business is trading, and how long it took for them to get to break-even point.
AND the most important question – Are they happy?
Step 4 should have brought you to your final decision. It may be one of two franchises or even one of one! The next step is to get some expert input.
Step 5 - Professional Advice
You’ve done loads of research and you’ve put in a lot of hard work – now you need ‘professional’ input into the decision-making process.
You need people who will help you to understand the ‘small print’.
Banks will help you to sort funding
A franchise lawyer needs to take a look at the Franchise Agreement
An accountant can work with you to draw up a business plan
Step 5 is what I call the ‘nervous step’ because you are dependent on other people and their advice and experience – but franchising in the UK is well established; there are many good advisors in the marketplace and most banks have specialist franchise management.
These five steps have brought you to your final destination on your route plan.
Step 6 - Making a Decision!
Ask yourselves 10 final questions:
- Do your strengths and weaknesses match the success criteria? Y/N
- Can you really afford the business? Y/N
- Is it a good investment? Y/N
- Will the ongoing rewards meet your expectations? Y/N
- Is there potential for expansion? Y/N
- Can you take the pressure? Y/N
- Are you confident in the franchise company? Y/N
- Are you going to enjoy yourself? Y/N
- Are you prepared to work very hard to achieve success? Y/N
- Will you follow the franchisor’s system? Y/N
If you have methodically gone through all five steps and answered these 10 questions ‘YES’ then you are ready to become a Franchise Owner.
Finding a franchisor who shares your values
Starting your own franchised business will require hard work and determination. Support and training from your franchisor will ensure you hit the ground running. But what happens if you find you want to run in different directions? Here, making sure values are aligned from the outset is important.
Let me tell you a story. I’ve worked in franchising for many years. For one former franchisor, I was tasked with interviewing franchisees who were leaving the business. This exit interview was designed to uncover any issues with the system and identify areas which could be improved. One franchisee was going after being a franchised estate agent for 20 years. I asked him why he had decided to pull out of a successful business. The answer was simple: “I’ve never liked dealing with the general public.”
At the time, it was a real eye opener! But also a valuable lesson, which I’ve always instilled into new franchisees. You must like what you do!
If a franchise’s values are all about providing the best customer service, then you will need to enjoy working with people, genuinely. For an estate agency franchise, you are dealing with people, often through some of the most stressful times of their lives and you must have a passion and drive for making that process as smooth and pain-free as possible.
Before committing to any franchise opportunity, you need to be true to yourself. Consider what values are important to you and understand what you both enjoy, and thrive doing.
In the property sector particularly, being available to talk to customers out of normal 9-5 working hours is necessary. Providing that ‘above and beyond’ service is what will set you apart. Any skill can be taught but if you don’t enjoy the job, it will be reflected in the quality of your work and the likely success of your franchise. Authenticity is important as it means you are genuine in your sentiment and customers can spot someone faking it from a mile away!
You must also like what you do day to day. Often franchisees will select a franchise because it’s something totally different. They say they were ‘looking for a change’. However, there should be a ‘spark’ or an interest in the sector. Often in property, we see prospective franchisees whose sole experience is limited to selling a house ten years ago. Invariably, they were unimpressed with the agent at the time, paid a lot for their services, and think they could do a better job. However, they only find out what the role really entails further down the line. Make sure you do your research, and are really interested in your chosen sector before making a commitment. This passion will see you through during the tougher times.
Aligning values in terms of the company culture and structure of your prospective franchisor is also often overlooked. Some franchises are very ‘corporate’ in the way they are run. For those aiming to escape from years working in the corporate world, this may be off-putting. Others, like Propertynest are small, family run businesses where we are invested in the success of each and every one of our franchisees. We have an open and flat structure, decision making processes and lines of communication. Neither set up is wrong or right, they will just suit different people.
Be honest with yourself about the type of environment you work best in, because if you are at odds with this, it could become a challenge for both you and your franchisor.
Technology can also be an issue for some people. If you are a self-confessed technophobe, then joining a modern franchise which has digitalised all processes for maximum efficiency, will present a steep learning curve. As I said before, any skill can be taught, but consider if you will be truly comfortable in this type of environment?
Company direction in terms of where you would like to take your own franchised business needs to be aligned with your franchisor’s view too. How ambitious are you? Will you want to build the franchise and sell in five years, or do you have a long-term view and want to leave a legacy for your children? Make sure you are on the same page as your prospective franchisor early on, so they can better support you with your goal.
From the business perspective of the franchisor, consider how ambitious the company is. Does this match with your own values? I’ve seen franchisors putting pressure on franchisees to grow their operations when they were already happy with the size of the business they were running. This made them uncomfortable, so be sure to have open and honest discussions with your franchisor about future plans.
Whatever franchise opportunity you ultimately decide to pursue, take some time to ensure your values are aligned with those of the franchisor, and you know precisely what the role entails. This will mean you know what you are taking on, and you are far more likely to be successful in your new career.
Paul Sheard, National Business Development & Training Manager, Propertynest has over 40 years’ experience and is well known in the property industry. He has worked with and helped grow some the sector’s most recognised franchised brands including Countrywide and EweMove.
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.
The benefits of being a company's first franchisee
In every franchise network, there is someone who has led the way for others, the pioneering franchisee! The individual who took the leap and bought into the challenge, and excitement, of being the company’s first franchisee.
However, that leap shouldn’t be into the unknown. If it is an ethical franchise, the model should be a proven concept, developed by a business with many years of successful trading under its belt.
Here at The Drain Guys, we’ve been successfully running our drainage company since 2015, and prior to this, I was a franchisee for a national drainage brand. Drainage is something I know inside and out. In 2022, due to an increasing demand for our services outside of our local area, I decide to franchise the business. So, whilst we are new to franchising, we are not new to drainage and have a very successful model that we are now ready to share with likeminded individuals.
Whilst buying into a new franchise may not be something you initially think about when researching opportunities, as many prospective franchisees are drawn to brands they know or ones they have researched and are shown to have a proven track record in franchising, being the first franchisee in a network can have many benefits.
Firstly, there is the opportunity to provide input and feedback to the franchisor on how the business should be run, giving you more influence in shaping the direction of the franchise and driving the growth of the business.
As the first franchisee you should have access to a more affordable / lower fee structure. As the franchise develops and more training and support is needed for the network, it is in evitable that the fees will be increased to support this.
You will tend to receive more personalised support from the franchisor as they will want to make sure that you are receiving sufficient training and support to get your business up and running and trading successfully, helping to encourage others to join the network. You will be the benchmark for all franchisees who join after you.
There is greater potential for success, because as the business develops, you will develop with it. There may be opportunities to expand and take on new territories.
And it is exciting to be known as the company’s first franchisee, the one who identified the opportunity and grasped it with both hands. McDonald’s first franchisee was a gentleman called Neil Fox. Neil took the gamble and bought the rights to open the first McDonalds franchise in 1953 for $1000. He has ultimately led the way for the 38,000 restaurants operating worldwide today.
At The Drain Guys we are looking for our first franchisee, our very own Neil Fox. We are looking for like-minded individuals who want to start our franchise journey with us.
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.