7 essential pieces of advice for anyone looking to buy a franchise
1) You don’t need to have experience in the industry, but you will need certain skills and attributes
Most franchisors don’t simply select their franchisees based on a CV and a list of skills. Many recruit based on the candidate as a person, and whether they would be a good fit for the network, and there are transferrable skills that most franchisors look for. Put simply, these are the ability and confidence to:
- attract and sell to new customers
- deliver excellent service in line with the manual
- maintain long-term relationships with both customers and franchisors
Bear in mind that some brands will only recruit franchisees who have experience in the sector, but others actively discourage this, preferring those who stick to the operations manual rather than previous experiences elsewhere.
2) Know what you can afford
Even if you’re in the fortunate position of being able to fund the entire startup costs of the franchise personally, it’s still worth considering sourcing external funding for a proportion of the costs.
Talk to the franchisor and as many existing franchisees as you can to find out real information. To get funding, you’ll need to set out your intentions in a well thought through business plan that demonstrates the potential and how you expect to reach your goals. Be realistic – show you’re aware of the challenges and how the business is expected to perform and you’ll be far more likely to inspire confidence in the investor.
3) The franchise marriage is a serious business
A franchise agreement is a long-term commitment that demands significant amounts of faith, expectation and confidence from both sides. Look at it like a marriage – don’t sign a franchise agreement lightly. You’re entering a business relationship with the franchisor, usually for at least 5 years. As with any relationship, there will be highs and lows across this time, so make sure you choose your new partner carefully.
If you have any doubts, you should ask questions or do your research to dispel any concerns at the earliest opportunity, as not doing so could lead to problems down the line, and legal remedies are often a difficult and costly process for both parties.
4) What is the operations manual?
As most franchisors will tell you, the operations manual is your franchise’s bible! In a franchise, it’s vital that operations are consistent and structured, so that all customers receive a standardised service regardless of where they are. The operations manual is a comprehensive guide to running the business and doing the “job” of the franchise. They contain the ground rules for the business including brand guidelines, operational and administrative obligations, and any reporting requirements. The manual should not be an old book kept in a drawer; it should be continually updated and change organically as the business and the wider world changes.
5) Why do you need legal advice on your franchise agreement?
The franchise agreement is a major commitment which ties you in for a number of years and requires major financial input. You wouldn’t purchase a house without a survey; the same principle goes here. Obtaining a review of the franchise agreement from a solicitor experienced in franchising (not just a general commercial or family solicitor) should form part of any due diligence process.
Legal matters are not a place to cut corners; the experience and expertise of a franchising expert is invaluable, and simply not available from the vast majority of high street firms. The British Franchising Association can provide you with a list of approved franchise legal professionals.
6) What is a franchise council?
It would be a very blinkered franchisor indeed who believes that they have nothing left to learn about their business. Franchisees are out there every day, dealing with the ups and downs of the business in an ever-changing environment, and have a lot of valuable knowledge to share. That’s where Franchise Councils come in. They’re a great way for franchisors to get feedback from their franchisees, as well as to build cross-network relationships. Most good franchisors should have a council (though often they have a different name!) though the frequency, format and number of representatives at the meetings will depend on the network.
7) How can you sell your franchise?
Generally speaking, selling a franchise works in a similar way to selling any other business. The main difference is that most franchisors include a clause within their agreement that they will get the final say on recruiting the right purchaser, and that there may be a fee for a successful resale (e.g. if they source the buyer on your behalf). The franchisor should have a meeting with the prospective purchaser at an early stage to establish whether they are suitable to join the network (or not!) as it can be very disappointing for the selling franchisee if the franchisor rejects their buyer late in the process.