Buying a Franchise

Description

Buying a Franchise is a good option to consider if you want to run your own business, with the added security of the backing of an established brand and proven business idea.

In the standard Franchise model a business owner (the franchisor) grants a licence to another business (the franchisee) to allow the use of a specific business model. Generally the franchisee trades under the franchisor’s brand name, and receives training and support. The licence usually restricts the franchisee to operation within a specific geographic area.

Franchises have a good prospect of succeeding – the British Franchise Association states that over 90% of franchisees are trading in profit after 5 years. But buying a franchise should not be seen as an easy option. Hard work, diligence and good health are all required.

Many household names are actually franchises. Examples are Prontaprint, Coffee Republic, Dyno-Rod, SignaRama, Molly Maid, Domino’s Pizza and McDonald’s. The success of these businesses proves the validity of the franchise concept.

Advantages of Buying a Franchise

You will have immediate access to a proven business concept. The business should be explained in complete detail, making it relative straightforward to replicate the business success of other franchisees. The risks of starting a new business are considerably mitigated.

Evaluating the business model is straightforward – you can check the progress of the current franchisees.

As it is directly in the franchisor’s interest to see you succeed, you’ll receive training, help and support from the franchisor to enable you to establish and grow your franchise.

Your business trades under the umbrella of a recognized and established brand name, a very valuable marketing asset.

Exclusive rights to the brand are granted in your territory.

Disadvantates of Buying a Franchise

You may find that the franchise agreement binds your business in unenvisaged ways. It may be hard to make changes for the particular market in your area.

The costs associated with buying a Franchise can act as a serious brake on the business. As well as the initial purchase cost, you will normally continue to pay royalties to the franchisor.

The franchisor could go out of business, with unpredictable results on your operation.

Choosing a Franchise Running a franchise is in many ways the same as being the boss of any business – you’ll need hard work, sales ability, good health and the ability to cope well with stress. When you come to pick a franchise, make an honest assessment of your own strengths and weaknesses. Are you good at selling? Do you have any specific skills? Do you want to be in an office all day, or do you prefer something more physical? How are you with people? Make sure you match up your choice of franchise to your own personality.

A good place to start your search for a franchise opportunity is the British Franchise Association, who offer a range of useful services. Many websites exist to showcase a wide variety of franchisors. Be wary when assessing any particular franchise opportunity. If it seems to good to be true, it probably is. Some pyramid marketing schemes masquerade as franchises, and these are definitely to be avoided.

When you reckon to have found the perfect franchise, don’t rush in. Consider how the business operates, and whether it will operate equally well in your proposed territory. Assess the potential competition. Check out all aspects of the costs. Make an appointment to discuss it with the franchise expert at your bank. Visit other franchisees in person. Check that the proposed levels of training and support from the franchisor will be sufficient. Run your eyes over the accounts and balance sheet of the franchisee (available from Companies House for a minimal fee).

Before finally signing the franchise agreement, let your accountant read it. And when you’ve signed on the dotted line, be prepared for a lot of hard work - with just a little excitement along the way!