What to consider when choosing a Franchise Opportunity

If you are confident that franchising is right for you,
then your next task is to identify the right business
from the 830+ available.

Once you have compiled your short-list, you should investigate the detail of each opportunity thoroughly.

Ask lots of questions

As a franchisee, you will enter into a long-term business and personal relationship with your franchisor. It’s very important that you completely trust them and have confidence in their business system. Don’t be afraid to ask as many questions as necessary to feel you can make an informed decision. Don’t be pressured into making a quick decision by offers of discounts or special deals.

The sort of questions you must ask are:

• What exactly would you be doing as a franchisee?
• How long have they been operating in the UK as a franchise?
• How many franchisees do they currently have? How many have been unsuccessful?
• What training do they offer? Is it included in the initial franchise fee? How is it structured?
• Are there training manuals and can you see them? How often are they updated?
• What tools does the business system include (eg, databases, websites, client management systems, etc) and are these bespoke? If so, who owns the copyright?

Speak to the banks

Because franchising is increasingly popular, high street banks have specialist departments to deal with funding. As with any lending, banks need to be confident that the franchise is viable before granting an application. They carry out their own research into the viability of the various franchises available so offer another source of objective, independent information. If they're satisfied that a franchise opportunity is financially viable, they may lend up to 70% of the capital investment required.

Speak to franchisees

Responsible franchisors operating ethical businesses will allow you to speak with existing franchisees as part of your due diligence process. If they don't, you should ask yourself why.

Existing franchisees will tell you about the day-to-day running of the business and the pros and cons of being in self-employment. They will also give you an objective view of the business opportunity and the franchisor.

• What ongoing support do they offer? Is it included in your ongoing fees or will you have to pay extra to access it?
• How long is the term of your franchise agreement and will you have to pay again to renew it?
• Will you be limited to operating in a specific territory?
• How do franchisees work together? Are they competitive or mutually supportive?
• What is the target market for your product or service?

Due Diligence and De-selection

Responsible franchisors are looking for the right people to join their organisation and will encourage and expect you to do your due diligence before making a decision. For example, they should advise you to have the franchise agreement independently checked and discuss your business plan to ensure your expectations and assumptions are realistic. The selection process should be two-way and a good franchisor will help you deselect an opportunity if it isn't the right one for you.

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The British Franchise Association

The BFA is the official trade body responsible for setting ethical standards in franchising. Its website, www.british-franchise.org, offers a wealth of information and advice for potential franchisees. There are three different levels of membership depending on how long a franchise has been operating in the UK:

• Full membership
• Associate membership
• Provisional membership

It isn't compulsory to join the BFA and there are many good franchises that are not members. However, if the company you are investigating is not a member, you should ask them why. Auditel obtained full membership in 1998.

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