So You Want To Buy a Franchise?
When it comes to buying a franchise, it can seem like a minefield of information is available, but saying very different things. Although it is always good to read up on the franchise brand you are looking to buy into, it is not enough to simply assume that it is the right brand for you. There are a few simple questions you can ask an existing franchisee, or franchisor, that will help you make an informed decision.
How Much Is The Total Cost Of The Franchise?
The first thing you really need to know is how much it will set you back to set up and start running the franchise. This is not included in the Franchise Fee, which only gives you the right to become a franchisee with that brand. Within the total price of a franchise, things such as stock, utilities, set up costs and other expenses are included before you have even opened your doors, as well as working capital, which will be required to establish your franchise in the short-term.
Be sure to ask how much total investment is, including VAT!
How Long Has The Business Been Operating Before It Became A Franchise?
Franchising is a proven way of showing the brand is stable and a model business in any industry. It is a tried and tested formula that allows expansion in a sustainable way.
You need to be confident that the franchisor has run the business successfully and most importantly, profitably, for a number of years before they started to franchise. Make sure to find out when the business started and when they started franchising.
Is The Business Affected By Seasonal Fluctuations?
An important aspect of any business is to understand peak shopping times. If the franchise is seasonal, look at how much of a change there is in footfall and business between the seasons/months. You will need to be able to ride the leaner months and ensure the business remains profitable. If unsure, ask the exiting franchisee how they fair during the off periods.
How Many Other Franchisees Are There In The Network?
If you are buying into a franchise that has a small number of existing franchisees, check why that is. Is it because the brand is looking to expand carefully and only in certain areas, or is it down to the relatively newness of the offering? If a respected multi-national brand, such as SUBWAY, is what you are after then this question can be modified to ask how many franchisees are in your local network. This will enable you to get a better understanding of your franchise competition, as well as be able to speak to exiting franchisees in your area about how they have faired.
What Support Is Provided To You As A New Franchisee?
The majority of franchisees join brands with little no experience of the industry or sector they are operating in. This is down to the fact that most franchisors will offer training in the various aspects of the brand, and in some cases, such as CeX, offer a very comprehensive and detailed training programme over several months, to ensure you are fully-equipped to handle the franchise.
The truth tis, most franchisees will never be 100 per cent in the role at first and will rely on the franchisor to guide and support them when needed. Make sure you ask this question to the franchisor as it will give you a clear indication of how much or little support and training you will receive.
Can You Speak To The Existing Franchisees?
As mentioned previously, having the opportunity to speak with existing franchisees in your network will offer you a much bigger picture of the road ahead. The franchisor might not be able to tell you everything there is to know about the franchise and will not be as subjective and independent as an existing franchisee. This is not to say they are hiding anything, but if you are investing a substantial amount from your savings into this venture, you want to cover all bases and gain as much knowledge as possible.
If the franchisor does not want you to speak to their franchisees ask yourself why. It is important remember that it is highly unlikely that every franchisee you speak to be completely honest and sometimes things franchisees highlight as a negative is not the fault of the brand or franchisor, but of their own making. You need to use your own savvy and common sense when evaluating what franchisees tell you, however if anything does ring alarm bells, talk to the franchisor about it for clarification.
Take The Plunge
This is just a small snippet of some of the questions you should be asking before investing in a franchise. It is by no means comprehensive and as always, ask questions you want the answers to. It is a personal decision to buy into a brand and one that you must be 100 per cent happy with before you take the plunge.