Buying a Franchise...the highway to business success?
Buying a Franchise is a very popular way of starting and running your own business with the potential of a very high success rate...providing you choose a good franchise in the first place!
You only have to look round your local High Street or take a glance at local media advertising to see many examples of them in operation....
...from carpet cleaners, driving instructors,fast food restuarants, car dealerships etc, etc!
So what exactly do I mean by Franchising ?
This is where you can run your own business under the guise of an existing business. This is achieved by the granting of a license by one person (the franchiser) to another (the franchisee). As a franchisee you can then trade as a business under the trademark and trade name of the franchiser.
You will benefit from the use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it. This should be strongly supported through continual assistance from the franchiser.
There are some very clear advantages to this:
- You don't have to come up with a new idea
- The business model should already be tested and shown to be working
- There are high level of support and starting the franchise should be made easy for you
- It provides a product or service that meets people's needs with clear benefits...and so becomes much easier for you to gain customers.
- Allows a degree of self determination...you work when you want to!
- Larger, well-established operations will often have national advertising campaigns and a solid trading name
- Comprehensive training programmes in sales and indeed all business skills.
- Good franchisers can also help secure funding for your investment and will help gain discounts on your purchasing requirements because of their larger buying power.
The dangers of rushing in!
Now people do become driven by their passion and enthusiasm and can be prone to rushing in and making bad decisions that are financially devastating.
An abundance of early enthusiasm, mixed with a large dose of naivety and added to an absence of research is a poisonous cocktail. So many people rush in believing the sales pitch...
...you will be your own boss
...the ability to work the hours you want
...an income that you can only dream of
...a lifestyle that meets your dreams
The reality is that many businesses like this fail to deliver the aspirations of their owners.
Where success is achieved, the biggest winner may not be you but the person you are paying for the assumed benefit of running the franchise. So to avoid making a wrong decision, you should carefully work your way through the following questions:
- What are the Cost Implications?
The Level of investment can be very significant (from £2,000 up to £100,000). Added to this are the costs of running the business and the ongoing management fees payable to the franchisee (normally taken as a percentage of your sales income).
- Who owns the business?
Each business outlet is owned and operated by the franchisee. However, the franchiser retains control over the way in which the business is promoted and elements of how it is operated.
- Who is in control and what do you own?
Each business outlet is owned and operated by you, the franchisee. However, the person who is licensing you to operate (the franchiser) retains control over the way in which products and services are marketed and sold, and controls the quality and standards of the business.
- What will I earn?
All that is left after paying the various fees and covering expense will be yours to keep. Don't just look at the headline rate suggested by the franchiser. Work out exactly what is involved, as you may not earn the income you are promised.
And remember, if you can't generate a viable income you will still be liable for the investment fee and maybe the ongoing management fees.
- THINK...If a Business is that good, why would someone sell it as a Franchise?
Of course there are some very legitimate reasons such as the ambitions of the originator, expansion can be achieved far quicker through a network of franchisees, and employment law issues aren't a problem and so on.
BUT you should approach the opportunity with a great deal of cynicism.
If the opportunity is that good it will stand up against the harshest scrutiny...so really take your time, do your research and DON'T BE SCARED TO WALK AWAY
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