Theoretically, purchasing a franchise could help you hit the ground running with your business efforts. Rather than having to start a whole new company with an unproven business model, you can obtain a model that demonstrably works in terms of factors including branding, marketing and pricing. However, running a franchise does not quite guarantee success.
Yes, you might know that a market definitely exists for the products or services that, as a franchisee, you would be offering. However, the most iconic brands are so successful today due to not only building but also maintaining that success. The responsibility for such maintenance would fall to you were you to take on another company’s brand by purchasing a franchise.
Therefore, you should check that you know certain crucial things before you go ahead with that purchase. Below, we detail a few examples of these “certain crucial things”.
Whether the franchiser has been suitably accredited
In the country where the franchiser is based, there might be a major organisation that is tasked with vetting franchisors for reliability and quality. Let’s assume that this country is the United Kingdom; in an article for franchiseinfo, franchise development director Mark Scott advises that you “look for franchises that are part of the British Franchise Association”.
This is vital because a franchise can’t become a member without first going through an accreditation process. You can also look at the British Franchise Association’s website to check that a particular franchise is definitely a member.
Other franchise options available
There might be a certain business that especially excites you as soon as you see it. Better still, it might be inviting people to become franchisees of the business. However, promising though this situation may initially seem, you shouldn’t go ahead with that business without first having shopped around. Be sure to speak to various franchisors.
Those should include franchisors similar to the one that first attracted your attention. You could also consider the cost set-up of that franchise and look for others that are similar in this respect.
Experiences of other franchisees
Many other people might have opted to buy that franchise long before the option of doing the same reached you. Therefore, when talking to the franchisor, don’t forget to ask them for a complete list of their franchisees. Then, get in touch with those who have much experience of the franchise and seek their opinions of the business. Have they run into any unexpected hurdles?
However, you also shouldn’t pass up opportunities to contact past franchisees. After all, they might have decided to abandon the franchise for reasons directly related to the franchise itself. You should also talk to relatively new franchisees. Every little helps when it comes to seeking opinions, and if your local area has any of these franchisees, they may be open to jointly marketing with you.
How you will fund your franchise
This doesn’t have to be a complicated matter, as there are various suitable funding options available. Those include funding from banks – though, of course, you should take close account of the terms and conditions attached to a bank loan before you actually take one out.
Scott notes that, in the UK, banks can lend as much as 70% of the cost if the franchise is established and perhaps more like 50% should the franchise have a relatively new concept. You might still find banks willing to provide funding for a franchise that doesn’t have the most proven track record, though you should also consider how much money you are personally able to pour into the project.
This is actually linked to another vital subject, and one that banks will also consider before giving you a loan: what your personal outgoings will be. The business itself could have various cost implications that, so far, have slipped your notice – including, perhaps, the cost of insurance.
You can save money on commercial insurance through obtaining it from a broker like Be Wiser Business Insurance; however, the expense of insurance still needs to be carefully factored in. The same applies for all of your outgoings; thus, consider whether the firm’s profit is likely to cover them. If not, you might have to look at a different franchise.