Member Article

Identifying the right franchise for you

If you are considering joining a franchise you need to be aware of what is involved and how to identify which businesses may best suit your needs. Here are some key areas to consider:

Membership of the bfa: the bfa accredits franchisors using a stringent set of criteria based on operational procedures, franchisor/franchisee practices and the European Code of Ethics for Franchising. All members are listed on the bfa’s website to allow potential franchisees to check which ethical franchisors have passed these checks.

Financial commitment: levels of investment range from smaller amounts, that you may already have available, to larger amounts that you may need a bank loan for. There are three major banking groups that the bfa recognise as specialists in franchising: HSBC, Lloyds and RBS/NatWest. Make sure that you ask for their franchise departments from the outset.

Your financial requirements: consider not only realistic earning potential, but also working capital requirements while your business is establishing itself and may not be turning a profit.

Lifestyle: you need to be happy with the commitments needed for your new business. You also need to consider the support and understanding of those around you, friends and family, which some franchisors like to gauge as part of their recruitment process.

Research:

• Speak to existing franchisees: you want an extensive list to choose from. Speak to both successful and any less-successful franchisees to give you a rounded view. If you can, go and visit them at their place of work. In some networks you will be encouraged to spend the day with franchisees as part of the recruitment process.
• Understand the business: make sure you understand all the business operations and what is involved on a daily basis.
• Training: be sure that the training provided, both initially to get you up and running and ongoing to help your business grow, is sufficient for you to be able to gain the skills required to operate the business successfully.
• Ongoing fees: ethical franchisors charge an ongoing management service fee (MSF), which will usually be collected either as a percentage of turnover, or through the supply of the raw materials that you need to operate. Make sure you understand the structure and level of fees, and what you get in return; these fees fund the ongoing support that you receive and the future development of the business. Although in some cases MSF could be a set amount per month, there is a clear advantage to fees based on a percentage of turnover; the franchisor is encouraged to help you succeed – as your success will mean their success.
• The people: don’t underestimate the importance of meeting the people involved at head office, finding out who you would be in contact with and what their experience is.
• Success rates: ask for success rates of other franchisees. There may be failures, but the important aspect is to understand why.
• Recruitment: if the franchisor doesn’t appear picky about who they recruit, walk away. You want to see that they are stringent in their process.

Professional advice: there are a host of professional advisors accredited by the bfa that specialise in franchising who can be invaluable in making sure that you’re taking the right steps – for example, when it comes to reviewing the franchise agreement, make sure you go to a specialist franchise solicitor – it can save you a lot of money in the long run.

Visit the bfa’s website at www.thebfa.org for objective advice and access to numerous educational and advisory resources.

This was posted in Bdaily's Members' News section by Paul Stafford .