What to consider before buying a franchise

What you want to do and what you will enjoy

When running your own business it’s important to do something you enjoy. If you don’t like number crunching it’s probably not a brilliant idea to buy an accountancy franchise, or if you’re not particularly tech-savvy then a software franchise might not be for you. On the other hand, if you like being outdoors then a gardening franchise could be an option and if you like driving then a courier franchise might be a smart move. It’s also worth thinking about what you want from your business, if you want more free time then you might consider a part-time franchise model, if you want to retire in five years you might invest in one which is quick to set up and establish. 

Your skillset

You may have a lot of skills which you’ve picked up over the years but are not necessarily aware of. Skills in management, sales, administration, finance and customer service are very transferrable and will benefit any franchise business owner. It’s worth taking a good look at what competencies you could bring to the franchise and what type of franchise would best fit with those competencies. Some franchises will require specific experience within the industry, others won’t, so make sure you do your research on this aspect. 

Your personality

Franchisees need to be “doers” willing to follow processes and procedures and implement them within their own businesses. Those who enjoy having ideas and running with them without consulting others may not necessarily find the franchise model suits them. Of course, most franchisors will welcome input on business improvements from franchisees so there is the opportunity to have your say, particularly with a younger, emerging franchise whose offering is still being shaped. Ask friends and family to help you evaluate how well your personality matches the business you’re considering, after all, they know you best!

Your goals

Your goals should be aligned with the franchisor’s. They should present their vision to you during the recruitment process and it must resonate with you and be an aspiration you also share. Furthermore, it should be clear how these shared business goals relate to you achieving your own life goals. 

How much money you can comfortably invest

You will need to have enough working capital to support the business ramp up and also to cover your personal costs before you start turning a profit. In general, it’s recommended to have working capital to cover 3-6 months and personal expenses to cover from 6-12 months. If you don’t have the total investment to hand, can you borrow it? Most banks have franchise departments who are willing to lend between 50-70% of the money you will require, the franchisor should be able to introduce you to contacts at these banks. There’s also the potential of a Government start-up/recovery loan which you can look into (www.gov.uk). 

Contract terms, including termination

These will be outlined in the Franchise Agreement – this is the document which governs the business arrangement between you and the franchisor, usually for a term of five years. You must be completely comfortable with the Agreement before signing it. For more information on the Franchise Agreement and common clauses in it, see our video “Your PGH Beegone franchise agreement queries answered”. You should also think about your exit strategy for the business so you have tangible goals to work towards.

Whether you need professional assistance with making this decision

Your franchisor will provide a certain amount of assistance to help you make your decision however, it’s likely you’ll need to seek independent professional advice on a number of fronts. You will want a specialist franchise lawyer to look over the Franchise Agreement. If you’re not from a financial background you might also seek input from an accountant on the numbers presented to you within the franchise information pack and for help with putting together your business plan and cash flow forecast. It’s also worth noting that it helps tremendously that your friends and family support your new business venture.

Your continuing payments to the franchisor

Most franchisors will have ongoing royalties which you will be required to pay them on a regular basis. See our article “What are franchise fees?” for further information.

Existing franchisee network

How are they doing? How many have left the system in the last year? This will give you a good indication on the general health of the network. You will also want to know how many franchise units are operating, although there are pros and cons to joining both an established franchise and an emerging franchise which we will explore in a separate article. Make sure you ask to speak to a few existing franchisees privately to get their honest feedback on the business – try to contact some newer ones and some old ones too (if that’s an option). If you are looking at opening the first franchise unit then ask what evidence the financial projections are based on so you can be confident that it’s a viable opportunity.

Demand and competition

How are they doing? How many have left the system in the last year? This will give you a good indication on the general health of the network. You will also want to know how many franchise units are operating, although there are pros and cons to joining both an established franchise and an emerging franchise which we will explore in a separate article. Make sure you ask to speak to a few existing franchisees privately to get their honest feedback on the business – try to contact some newer ones and some old ones too (if that’s an option). If you are looking at opening the first franchise unit then ask what evidence the financial projections are based on so you can be confident that it’s a viable opportunity.

We cover some of the above points, and more, in our “Which is the best franchise for me?” article.

Whatever route you decide to take, research is key to ensure you are completely comfortable with your decision. 

If you’d like further information about becoming part of the PGH Beegone family, please get in touch with us:

Tel: 01483 387414
Email: opportunity@pghbeegone.co.uk
www.pghbeegonefranchise.co.uk

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