Being your own boss can be very rewarding. But before you embark on this life-changing journey it’s time to have a conversation with the most important person in the room… YOU
After 20 years in the franchise industry, I have learned that there are certain principles that you should consider carefully. Purchasing a franchise can be confusing at the best of times. So how do you choose the right one?
Franchising has become big business. With over 950 franchise brands in the UK and Ireland and huge numbers globally, franchising has now become one of the most successful ways of starting a new business. Recognised by the banks as the safer and smarter way of starting a new enterprise, business format franchising is an excellent model for people who want to “be in business for themselves – but not alone by themselves”.
Not everyone is cut out to run their own business. However, franchising does provide a sound business model for those who are unable to invent the next big thing. People who are not pure entrepreneurs but still want to be their own boss and run their own business. However, there are certain things to consider, before parting with your hard earned cash and investing it in a business format franchise. Below are what I believe are the 6 key principles you need to know.
1. The value of a trusted brand
Starting your own business from scratch can be difficult. It can take years for people to get to know who you are, where your business is located and even longer to build a history of quality client testimonials and brand credibility.
Contrast this with buying a trusted national Franchise brand. You immediately become part of that brand family. Instead of having to reinvent the wheel, you automatically inherit the brand history and gain instant credibility. The franchisor’s good news stories that they have worked hard to build over the years, become your good news stories. That is the power and value that comes from investing in a trusted brand and it is worth its weight in gold.
2. Can you follow a recipe?
Why do so many people buy cookbooks? Well, if you want to cook like a master chef, you must follow the recipe. In franchising the recipe, often referred to as the formula, is the key to success.
Ask any bank or national/international franchise association and they will tell you that the two main reasons why franchisees fail, is not following the formula and coming into business underfunded!
Franchising is all about following the model the franchisor has put in place. Just like baking the perfect cake, the franchisor has established a successful recipe. All you need to do is use the same ingredients and cook them for the correct amount of time on the right heat and you will have a successful end product.
The franchisor has established and built an existing business. The formula has been recorded in the manuals and in the training programme run by the franchisor. If you follow the system and add the magic ingredient, hard work, you too should be successful.
3. Is there a market in your country?
This sounds like I’m stating the obvious. You must satisfy yourself that the business you are buying has an established marketplace. It may work really well in America - or whatever country the master franchise is based in ̶ but will this transfer to the country where you live?
You could be the first to bring a new concept into the country and make a fortune, but there is also the risk that the demand for the product or service may not transfer. Ask yourself, can you afford to gamble your life savings? Is the demand for the business based on a densely populated city only? Will it work where you live, especially if you live in a provincial seaside town or a rural area? How can you follow a tried and tested formula if there isn’t one to follow?
If funds are tight, then you may be better to stick with a proven business system with an established market that can be backed up by facts and figures verified by existing franchisees.
4. Can you afford it?
Remember, the second most common reason why franchisees fail is that they come into business underfunded. In other words, they can afford to buy the business, but can’t afford to run the business and still be in business 12 months later. So make sure you decide what you can afford before you start looking. This will help you avoid overstretching yourself and enable you to choose the business that will suit your pocket.
You can do this by finding out what the true cost of starting the business is. This is made up of the initial franchise fee, accountant & legal fees, premises etc. You also need to know what working capital you need (i.e the money you will need to run your business on a day to day basis). Finally, when will you be able to start drawing a wage from the business? And most importantly how you are going to pay your living costs during the start-up phase?
Speaking with other franchisees of the same business will help you understand how much money they needed and how long it was before they started making a profit or drawing a wage. You will get a number of different answers, so speak to as many as you can and you will get a good idea of what the average is.
There’s little point in spending your life savings on a business that will not produce the kind of income that’s in line with your needs, wants and aspirations.
The point is, will the business produce enough for you financially and stimulate you mentally? You may be talented and driven but common sense should prevail. Make sure you verify what the earnings are. This can only really be done by speaking with a wide variety of franchisees of the same business you are looking to join. Don’t be taken in by the high earners. They may be few and far between or there could be other reasons why they are earning more, such as their location or time in the business.
6. Do you have the X factor?
Can you really see yourself running this business? Do you have the acumen, determination and drive to run your own franchise? Will it suit you and your background? Are you willing to get your hands dirty, roll up your sleeves and get involved? All good questions to ask yourself. I would recommend that you involve your partner in initial discussions, meetings and decision making, so they understand what’s involved and the commitment required by you. Make sure you have their full support.
Finally, will you enjoy doing it? Enjoying the journey is key - If you don’t enjoy doing something, you won’t do it for long. So picture where you want to be in five or 10 years’ time. Celebrate your successes, it will help to focus your mind. If you are still not sure once you reached the end of this process, I would recommend you start it again. You haven’t spent any money yet and may help you get to the right answer.
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