The world of franchising can be an intimidating prospect for a beginner, but it is worth reading about it if you like the idea of running your own business.
In basic terms, a franchise offers people a pre-agreed business framework that the franchisee will follow to build their own firm. The 2012 NatWest BFA (British Franchise Association) Survey revealed there were 929 franchises in the UK at the start of the year, which gives an indication of the level of choice available.
This huge range of options can make it even more of a challenge to choose one that suits you; however, the four simple steps below should help you find your way from pondering the possibility of a franchise through to signing on the dotted line:
Step 1: Self-assessment
The first step in any prospective franchisee’s journey is a self-assessment, as you need to understand what you want to get out of the franchise before you start looking at possible businesses. This means asking yourself what hours you are willing to put in, what kind of skills you have and how much money you can afford to put into the business.
It is vital to be honest with yourself, as an honest opinion can make the decision-making process much easier. For example, if you admit to yourself that you do not enjoy selling to customers, then you can opt for a franchise that involves just a steady flow of orders – rather than one that gives you the opportunity to increase earnings through effective salesmanship.
Step 2: Shortlist suitable options
Your self-assessment will tell you a lot about what type of franchise you would be happy running, as each one will involve a different business process. You might want to use a franchise to sell your own skills – perhaps IT expertise – or build an organisation which you manage. Similarly, your lifestyle could mean you need a business that allows you to limit your hours or work from home.
In terms of money, your preferences on investment and earnings will play a large role. Some franchises are aimed at providing you with a higher income, while others might allow you to build up capital in the business that can be sold off later; effectively providing a longer-term investment.
Some other considerations that will help you shortlist franchises are whether you mind putting money into capital assets – the items you use to provide your service – or if you prefer lower overheads. All of these factors and more will help you narrow things down.
Step 3: Assess the chosen franchises
Once you have a few different options in mind, it is time to research them properly as business opportunities. This should involve both a thorough investigation of each market – as well as an understanding of what each franchise agreement is offering, how this fits in with your own preferences and whether you can deliver on expectations.
In 2011, 91 per cent of franchisees in the UK were profitable, which shows how many franchises lead to successful businesses – but also indicates that some do struggle. When you read a franchise proposal, you need to be confident that you can do everything that is asked of you. It will help to sit down with the franchisor and perhaps even other franchisees to discuss any problematic areas.
Step 4: Check and sign legal agreement
Once you are comfortable with a franchise offer, you need to double-check your funding. Once this has been done, you are ready to sign up. Take all the professional advice you can get – from lawyers and accountants among others – before putting pen to paper, so that you can sign with confidence rather than worry about grey areas.
With the legal agreement in place, it is time to take the reins and make your business a success. You will undoubtedly have some training to go through with the franchisor before you can begin trading, but you are officially in charge of your own firm…